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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Tertiary Minerals Plc | LSE:TYM | London | Ordinary Share | GB0008854563 | ORD 0.01P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.0025 | -2.50% | 0.0975 | 0.095 | 0.10 | 0.0975 | 0.0975 | 0.0975 | 20,100,121 | 08:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Misc Nonmtl Minrls, Ex Fuels | 181k | -541k | -0.0003 | -3.33 | 2.11M |
From Apr 2019 to Apr 2024
TIDMTYM
RNS Number : 2549K
Tertiary Minerals PLC
12 December 2018
12 December 2018
Tertiary Minerals plc ("Tertiary" or "the Company")
Audited Results for the year to 30 September 2018
Tertiary Minerals plc, the AIM traded company building a strategic position in the fluorspar sector, is pleased to announce audited results for the year ended 30 September 2018.
Operational Summary for 2018:
-- Storuman Fluorspar Project, Sweden: Exploitation (Mine) Permit re-assessment process by the Swedish Mining Inspectorate is ongoing. Two key issues resolved.
-- MB Fluorspar Project, Nevada:
Ø First phase of Scoping Study level bench scale metallurgical testwork completed at SGS Lakefield, Canada.
Ø Second phase of testwork planned for 2019
-- Royalty Interest Gold Projects, Finland: Aurion Resources has re-logged and sampled the Tertiary drill cores with a view to further drilling in 2019
-- Possehl Erzkontor GmbH & Co. KG: Through the Memorandum of Understanding signed last year, Possehl continue to support the Company with the development of its projects and evaluation of potential acquisition opportunities
-- Fluorspar prices continued to rise in the year due to rising demand and China imposing strict environmental regulations on domestic fluorspar miners. Chinese benchmark acid-spar has recently hit a seven year high of mid US$565/tonne (FOB China)
Commenting today, Managing Director, Richard Clemmey said: "It is pleasing to see the recovery in the fluorspar market continue in 2018 but It has been a year of frustratingly slow progress for our Storuman Mine Permit re-assessment process. We have made good progress in establishing that our operations will not affect the nearby Natura 2000 area and that reindeer husbandry is able to co-exist alongside the open pit mine, but we still face objections from the County Administration Board (CAB) regarding the location of the Tailings Storage Facility. We, together with our Swedish consultants and legal team, strongly disagree with the CAB's position and so remain hopeful for a positive resolution of this matter".
"Looking forward to 2019, with the continued support from Possehl we look ahead to progressing the Scoping Study on our large MB project as well as continuing our evaluation of potential complimentary acquisition targets".
"I would like to thank all shareholders for their support in 2018 and hope to be reporting positive news in 2019."
Enquiries Tertiary Minerals plc Richard Clemmey, Managing Director Patrick Cheetham, Executive Chairman +44 (0) 1625 838 679 SP Angel Corporate Finance LLP Nominated Adviser & Broker Ewan Leggat/Lindsay Mair +44 (0) 20 3470 0470
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.
Notes to Editors
Tertiary Minerals plc (ticker symbol 'TYM') is an AIM-traded mineral exploration and development company building a significant strategic position in the fluorspar sector. Fluorspar is an essential raw material in the chemical, steel and aluminium industries. Tertiary controls two significant Scandinavian projects (Storuman in Sweden and Lassedalen in Norway) and a large deposit of strategic significance in Nevada, USA (MB Project).
CAUTIONARY NOTICE
The news release may contain certain statements and expressions of belief, expectation or opinion which are forward looking statements, and which relate, inter alia, to the Company's proposed strategy, plans and objectives or to the expectations or intentions of the Company's directors. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the control of the Company that could cause the actual performance or achievements of the Company to be materially different from such forward-looking statements. Accordingly, you should not rely on any forward-looking statements and save as required by the AIM Rules for Companies or by law, the Company does not accept any obligation to disseminate any updates or revisions to such forward-looking statements.
Chairman's Statement
I am pleased to present the Company's Annual Report and Financial Statements for the year ended 30 September 2018. In the period under review we have continued to focus on the Company's three strategically located fluorspar projects in Europe and the USA.
At the Company's most advanced project, Storuman in Sweden, the repercussions of recent mining case law continue to impact the 2016 grant of our Exploitation (Mine) Permit. The Swedish Mining Inspectorate's review of the grant of the Exploitation Permit has continued throughout the year and has consumed an inordinate amount of management time. I encourage shareholders to read our Operating Review where we set out where this time has been spent and I would highlight that, despite the lack of headline news, two of the three issues raised by stakeholders have been successfully addressed and resolved by the Company. The remaining issue relates to a perceived conflict between the location of the Tailings Storage Facility and reindeer herding activities. The Company is frustrated in resolving this issue by a refusal on the part of the reindeer herding community to engage directly with the Company and the failure of the County Government to adequately address the Company's plans for mitigation of this conflict. Despite this remaining issue, the Company is confident that, with political will, this grant of the Exploitation Permit will eventually be confirmed.
At our MB Project in Nevada, where we have a significant JORC compliant Mineral Resource, a small programme of metallurgical testwork was carried out earlier this year and we have now formulated a plan to address the metallurgical complexity that characterises the near surface mineralisation that would be mined in the early years of the Company's preliminary mine plan. Assuming this progresses satisfactorily we intend to progress the economic scoping study for development of the project in 2019. This may include further drilling targeting conceptual higher grade targets in the northern part of the project.
Work on our second European project, Lassedalen in Norway, has been a lower priority during the year. However, further development work is justified and drilling is required to increase the size of the current JORC Mineral Resource Estimate which, alongside Storuman, is well located for the large European fluorspar market.
The Company's fluorspar projects contain a total of 13.1 million tonnes of fluorspar in JORC classified Mineral Resources and so we follow developments in the fluorspar market very closely. I can report that the upturn in prices that we reported in 2017 has continued strongly in 2018. The benchmark (FOB China) mid-price of acid-grade fluorspar is now $565/tonne (2017 Annual Report: $410) which compares well to the CIF Rotterdam price of $357.5/tonne used in the positive scoping study for development of the Storuman Project. The increase is, we believe, being driven by environmentally motivated mine closures in China and an increase in the value of downstream value-added products.
The general industry view is that fluorspar prices will continue to appreciate on the back of rising demand and this is discussed in more detail in the Strategic Report. Based on macroeconomic drivers the Company continues to be strategically placed to capitalise on the looming supply gap by developing its 100% controlled fluorspar assets which are located in the key markets of Europe and the USA.
The Company's efforts during the year to make a complementary project acquisition with nearer term production potential have not so far been successful despite coming close in one case. The Company is rightly cautious in its assessment of targets and follows the recently well used maxim that "no deal is better than a bad deal". We continue to assess opportunities and, through the Memorandum of Understanding ("MOU") signed last year, continue to enjoy the strong support of leading global commodities trading group, Possehl Erzkontor GmbH & Co. KG in this endeavour.
In addition to our fluorspar projects we retain a royalty interest in the Kaaresselkä and Kiekerömaa Gold Projects in Finland where, just to the north, the project owner, Aurion Resources, has recently drilled high-grade gold mineralisation on their Aamurusko Prospect. They have had three drill rigs working on this project and have advised that drilling may also be scheduled for our royalty interest projects in 2019.
At year end the Audit Committee and the Board are required to carry out an impairment review of the carrying values of the Company's various project interests and, in light of the current permitting delays surrounding the Storuman Project, it was decided that the carrying value of the Storuman Project and consequently the inter-company loan to the holding subsidiary, Tertiary Gold Limited, should be impaired. This has the effect of significantly increasing the loss for the year, but this is a non-cash movement and the Board is able to reverse this impairment in future when justified by future project developments.
Our Annual General Meeting for the year ended 30 September 2018 will be held in London on Thursday 21 February 2019.
Patrick Cheetham
Executive Chairman
11 December 2018
Strategic Report
Group Overview
Company's Aims
-- To become a reliable long-term and competitive supplier of high quality fluorspar to world markets.
Company's Strategy
-- To acquire and develop fluorspar deposits located close to established infrastructure and key markets in stable, democratic and mining friendly jurisdictions.
-- To be revenue generating in the near term from potential new acquisition targets.
Principal Activities
-- The principal activities of the Group are the identification, acquisition, exploration and development of mineral projects with primary focus on fluorspar, the main raw material source of fluorine for the chemical, steel and aluminium industries.
The head office is based in Macclesfield in the United Kingdom with core operating locations in Storuman in Sweden, Lassedalen in Norway and the MB Project in Nevada, USA.
Company's Business Model
For exploration projects, the Group prefers to acquire 100% ownership of mineral assets at minimal expense. This usually involves applying for exploration licences from the relevant authority, as was the case for the Storuman and Lassedalen projects. In other cases, rights are negotiated with existing project owners for initially low periodic payments that rise over time as confidence in the project value increases and this was the case for the MB Project. For acquisition targets with the potential to generate revenue in the near-term, the Group is considering a range of targets on a case-by-case basis.
The Group currently operates with a low-cost base to maximise the funds that can be spent on exploration and development - value adding activities. The Company has five full-time employees including the Managing Director who work with and oversee carefully selected and experienced consultants and contractors. During the year the Board of Directors comprised one independent Non-Executive Director, the Managing Director and the Chairman.
Administration costs are reduced via an arrangement governed by a Management Services Agreement with Sunrise Resources plc, whereby Sunrise Resources pays a share of the cost of head office overheads. As at the date of this report Tertiary is a significant shareholder (as defined under the AIM Rules) of Sunrise Resources plc, holding 5.17% of the issued ordinary share capital.
The Company's activities are financed by periodic capital raisings, through private share placements. Access to capital through this method continues to be challenging and this is a limiting factor to the speed at which the Company can progress the development of its projects. When projects become more advanced, or as acquisition opportunities advance, the Board will seek to secure additional funding from a range of various sources, for example debt funding, pre-financing through off-take agreements and joint venture partnerships.
Operating Review & Performance
Fluorspar Projects
Storuman Fluorspar Project, Sweden
2018 Operational Summary
-- Exploitation (Mine) Permit re-assessment process by the Swedish Mining Inspectorate is ongoing
The Company's 100% owned Storuman Project is located in north central Sweden and is linked by the E12 highway to the port city of Mo-i-Rana in Norway and by road and rail to the port of Umeå on the Gulf of Bothnia. A bulk rail terminal, constructed in 2012, 25km from the project site, is likely to become an important factor in the cost-effective delivery of fluorspar to the key European fluorspar market.
JORC Compliant Mineral Resource
Hot Features
Premium
Classification Million Tonnes (Mt) Fluorspar (CaF(2)
%)
Indicated 25.0 10.28
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Inferred 2.7 9.57
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Total 27.7 10.21
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Exploitation (Mine) Permit Application
The Company submitted its Exploitation (Mine) Permit application in July 2014 to the Swedish Mining Inspectorate and following an extensive consultation process the 25-year Exploitation (Mine) Permit was granted on 18 February 2016.
However, as a consequence of the Supreme Court's decision to overturn the grant of a third-party mining company's Mine Permit in the south of Sweden (Norra Karr Mine Permit - rare earth element project, owned by Leading Edge Minerals) the government returned the Storuman Mine Permit case, along with many other cases, back to the Swedish Mining Inspectorate for re-assessment in December 2016. The re-assessment is intended to consider the impact of mining in the concession area on a wider surrounding area.
Earlier in 2017 the Swedish Mining Inspectorate requested additional information from the Company relating to the original Environmental Impact Assessment ("EIA") and the wider area and this information was provided to the Swedish Mining Inspectorate, in the form of an updated EIA, in May 2017. The additional information was accepted by the Mining Inspectorate which subsequently invited all stakeholders to provide comments on the application and additional information. In response to the stakeholder feedback the Swedish Mining Inspectorate requested further detail from the Company in relation to the impact of proposed operations on the Natura 2000 and reindeer herding within the wider surrounding area and were granted a deadline of 16 April 2018 to respond.
Given that the level of detail required for the wider area has changed in response to the new case law, the Company engaged, through a series of meetings, with its Swedish consultants, lawyers, the Swedish Mining Inspectorate and The County Administrative Board of Västerbotten ("CAB") in an effort to establish the requirements prior to the work being executed and submitted. Despite the Company continuing to have a good relationship with the CAB and has fully engaged with its key staff members throughout this process, without which the original Mine Permit would not have been awarded in the first place, the CAB seems unable to provide definitive guidance or opinion regarding the additional information or requirements.
Subsequently, comprehensive supplementary reports by the Company's consultants and a legal statement were prepared and submitted to the Swedish Mining Inspectorate in April 2018, consisting of:
-- In-depth analysis of reindeer herding -- Reindeer herding and reindeer grazing conditions in the area of planned mining operations
-- Description of vegetation and reindeer conditions in the area of the planned tailings storage facility ("TSF")
-- In-depth analysis of impact on the Natura 2000 area, Kyrkbergstjärnen
The reports concluded that the Company's proposed mining operations at Storuman, with mitigation measures proposed, will have only a minimal impact on reindeer husbandry and that there will be no impact on the Natura 2000 area.
Following consultation between the Mining Inspectorate and key stakeholders, in July 2018 the CAB returned the following opinion to the Mining Inspectorate:
-- The CAB is satisfied that the reindeer herding can, with mitigation measures, coexist alongside the mine itself
-- Natura 2000 area: The CAB is satisfied with the supplementary in-depth analysis and has concluded that a supplementary Natura 2000 permit is not required
-- Tailings Storage Facility ("TSF"): The CAB is not satisfied that the mitigation measures proposed by the Company enable the coexistence of reindeer husbandry and the TSF operation. The CAB has expressed the view that the proposed TSF location should be protected to secure reindeer husbandry.
The CAB has therefore advised against grant of the Mine Permit in its current form.
The Company, together with its Swedish consultants and lawyers, strongly disagree with the CAB's assessment that reindeer herding and the TSF cannot co-exist and maintain the conclusion of the in-depth analysis of reindeer herding that the Company's proposed mining operations at Storuman, with mitigation measures proposed, will have only a minimal impact on reindeer husbandry. The Company therefore prepared a comprehensive legal statement and submitted this to the Mining Inspectorate, summary as follows:
-- The CAB has not sufficiently assessed the balance of interests between reindeer herding and mining under Chapter 3 of the Swedish Environmental Code
-- The CAB has provided no supporting information as to why they believe the coexistence of reindeer husbandry and the TSF is not possible despite the Company providing in-depth analysis which shows that the proposed mining operations, with the extensive mitigation measures proposed, will have only a minimal impact on reindeer husbandry
-- Socio-Economic factors have not been taken into account in the CAB's assessment despite the fact that the Storuman mine will result in a significant number of direct and indirect jobs in a sparsely populated area of Sweden containing a low number of inhabitants who are working age and an ageing population compared with the national average
-- The Company has fully satisfied the requirements of Chapters 3, 4 and 6 of the Swedish Environmental Code by providing a comprehensive EIA for the mining location and wider surrounding area
The Company now awaits feedback from the Mining Inspectorate in response to its legal statement. Whilst the process is slow and frustrating, the Company continues to co-operate with the Mining Inspectorate and believes that the original Mine Permit application, EIA and supplementary information are of a very high standard. The Company remains hopeful of a positive resolution to this matter but it is worth noting that the Company has no influence on the speed at which the re-assessment of the grant of the mining permit is being processed by the Authorities. Any ratification of the grant of the mining concession will, however, be open to appeal and the Company will therefore not spend any further money on exploration or development of the Storuman Fluorspar Project until the matter is resolved.
MB Fluorspar Project, Nevada, USA
2018 Operational Summary
-- First phase of Scoping Study level bench scale metallurgical testwork completed at SGS Lakefield in Canada
The MB Property comprises 146 contiguous mining claims covering an area more than 2,800 acres and is located 19km south-west of the town of Eureka in central Nevada, USA. The state of Nevada is widely and justifiably recognised to be one of the most attractive mining jurisdictions in the world. Eureka is located on US Highway 50 and the main railroad is located 165km to the north of the deposit providing bulk freight distribution to the East and West of the USA. The USA, like Europe, is a key fluorspar market currently importing the majority of its fluorspar requirements. Rail access to the west coast provides access to Asian markets, which may be a target market in the future.
JORC Compliant Mineral Resource
Classification Million Tonnes (Mt) Fluorspar (CaF(2)
%)
Indicated 6.1 10.8
-------------------- ------------------
Inferred 80.3 10.7
-------------------- ------------------
Total 86.4 10.7
-------------------- ------------------
Metallurgical Testwork
Early metallurgical testwork completed at SGS Lakefield has indicated that the ore in certain areas of the deposit is metallurgically complex, presenting certain processing challenges, and therefore the Company has engaged the services of one of the world's leading consultant fluorspar metallurgists to assist with the testwork. The Company, consultant metallurgist and SGS Lakefield have scoped the next phase of testwork which is planned with the aim of producing commercial grade acid-spar and a by-product, mica.
Following successful completion of the metallurgical testwork, the Company will progress with modelling various production scenarios and optimisation of the transport method/cost from mine to the USA market and ports. Successful completion of these work programmes should enable the Company to work towards completion of a Scoping Study for the project in 2019. Further work required for the completion of the Scoping Study may include an additional phase of drilling to target higher grade mineralisation, in line with the recommendations received from the appraisal of the MB deposit from world renowned economic geologist, Dr Richard Sillitoe.
Lassedalen Fluorspar Project, Norway
The Lassedalen Fluorspar Project is favourably located near Kongsberg, 80km to the south-west of Oslo in Norway. It is less than 1km from highway E134 and approximately 50km from the nearest Norwegian port. The Company views this resource as strategically important for the European market alongside its Storuman Project.
JORC Compliant Mineral Resource
Classification Million Tonnes (Mt) Fluorspar (CaF(2)
%)
Inferred 4.0 24.6
-------------------- ------------------
Given the commitments on its other fluorspar projects and acquisition targets, further exploration at the Lassedalen Project has been a lower priority in 2017/2018.
Once development work re-commences for the project, the immediate objective will be further drilling aimed at increasing the size of the current JORC compliant Mineral Resource Estimate.
Acquisition Opportunities
Whilst the Company remains committed to its fluorspar business and the development of its fluorspar assets, throughout 2018 it has been reviewing complementary project acquisition opportunities potentially capable of generating revenue and profits in a shorter timescale. Finding quality projects is not an easy task and the Company has discontinued its review on several shortlisted projects, where either the acquisition breaches any of the class tests pursuant to AIM Rule 14 and therefore would constitute a reverse takeover, or the due diligence process has highlighted certain technical, economic or legal fatal flaws. The Company continues to evaluate numerous potential acquisition opportunities, however there is no guarantee that any deal will be successfully executed at this point.
Strategic Relationship with Possehl Erzkontor GmbH & Co. KG
Further to the signing of a MOU in 2017 with leading global commodities trading group, Possehl Erzkontor GmbH & Co. KG (Possehl), a wholly owned subsidiary of CREMER, Possehl continue to support the Company with the development of its projects and evaluation of potential acquisition opportunities through regular dialogue and meetings.
Non-Core Projects
Kaaresselkä and Kiekerömaa Gold Projects, Finland
Following the successful sale of its two legacy gold assets, Kaaresselkä and Kiekerömaa in Finland, to TSX--V listed Aurion Resources Ltd, the Company sold its Aurion shares for GBP117,633, in November 2017, resulting in a profit of GBP31,264 on the value of the shares issued as part consideration for the sale of the project at the time of issue.
The Company has been informed that Aurion recently relogged and sampled the Tertiary drill cores and Aurion may drill test some targets in 2019. The Company retains pre-production and net smelter royalty interest in the projects.
Rosendal Tantalum Project, Finland
The Exploration Licence for the project expired in October 2015 and the Company has applied for a renewal of the Licence. If the Company is unsuccessful in finding a suitable partner or buyer to progress the project, it is unlikely the renewal will be granted.
Health and Safety
The Group has maintained strict compliance with its Health and Safety Policy and is pleased to report there have been no lost time accidents during the year.
Environment
No Group company has had or been notified of any instance of non-compliance with environmental legislation in any of the countries in which they work. In late 2017 the Company received a prestigious national award for its innovative reclamation and sustainable mineral development work on its MB Project in Nevada, USA.
Fluorspar Market and Strategic Opportunity(*)
Fluorspar - Principal Uses
There are two principal commercial grades of fluorspar:
-- Metallurgical-spar (60-96% CaF(2) ) -- Acid-spar (+97% CaF(2) )
Metallurgical-spar accounts for approximately 35% of the total fluorspar production with the principal applications being:
-- Steel production - used as a flux to lower the melting temperature and increase the chemical reactivity to help the absorption and removal of sulphur, phosphorus, carbon and other impurities in the slag
-- Cement - used as a flux to speed up the calcination process and enables the kiln to operate at lower temperatures
Acid-spar, the grade of fluorspar which the Company is planning to produce, accounts for approximately 65% of total fluorspar production with the principal applications being:
-- Aluminium production - used to produce aluminium fluoride (AlF(3) ) which acts as a flux to lower the bath temperature in the manufacture of aluminium
-- Manufacture of hydrofluoric acid (HF) - the primary source of all fluorochemicals (the single largest consumer of fluorspar), with a wide range of applications including:
o Fluorocarbons, e.g. refrigerant gases, propellants, etc.
o Electrical and electronic appliances
o Metallurgical industry (extraction, manufacture and processing)
o Lithium batteries
o Pharmaceuticals, polymers and agrochemicals
o Petrochemical catalysts
Fluorspar - Production, Consumption and Price Trend
The current global production of fluorspar is approximately 5.7 million tonnes per year:
-- Major producing regions: China (>50% of the world's production); Mexico; Mongolia/CIS; S. Africa
-- Major Consuming regions (highest to lowest): China; North America; Europe; Mexico; Russia -- The global supply and demand for fluorspar grew over the decade 1998 to 2008
-- Since the global financial crisis in 2009 there was a contraction in acid-spar demand driven by a combination of environmental legislation and demand - fluorspar price followed this downward trend
-- In 2017 prices for acid-spar started to recover and the price recovery has continued through 2018, export price for acid-spar (FOB China) is a traditional benchmark price and is currently published as mid US$565/tonne (Industrial Minerals Magazine)
-- The price increases are believed to be driven by the following key factors:
o Increase in production of downstream value-added fluorspar products
o As China moves its focus to environmental protection they have implemented strict environmental policies and permitting requirements resulting in a number of fluorspar mines closing - Chinese fluorspar production down 13% year-on-year in 2017
o Between 2012 and 2016 various fluorspar producers outside China have closed their mining operations
-- The equivalent price delivered into Europe (CIF Rotterdam), published as mid US$515/tonne, has now started to recover following the FOB China price recovery
-- Overall long-term upward trend in price
Fluorspar - Outlook and Strategic Opportunity
-- Industry view (producers, end users, analysts) is that demand for acid-spar will increase by >3% per year over the next 5 years and prices are forecast to increase in the medium to long-term, the key drivers being:
o No large scale commercial alternative or recycling
o Refrigeration demand will continue to grow in emerging economies - new generation of zero ozone depleting potential ("ODP") and very low global warming potential ("GWP") refrigerants, hydrofluoroolefins ("HFO's")
o Driven by environmental legislation, most recently the Kigali Amendment, where over 170 nations agreed to phase down low ODP, high GWP Hydrofluorocarbons ("HFCs")
o Energy reduction in the steel and aluminium industry
o Emerging uses - fluoropolymers in lithium batteries for example, demand for automotive Li--ion batteries forecast to grow CAGR 34%
o Chinese supply-demand dynamics
-- China produces >50% world fluorspar production
-- China fluorspar exports continue to decline with acid-spar exports decreasing >50% since 2011, driven by increasing internal demand and production/export restrictions, China already consumes 90% of its fluorspar domestic production - heading towards becoming a future net importer
-- Western Europe and North America are the largest acid-spar consuming regions outside China, importing more than 900,000 tonnes per year
-- USA imports 100% of its fluorspar -- North America and Europe face the potential risk of security of supply
-- Fluorspar is classified as a critical raw material by the European Commission - high risk of supply shortage and consequent impact on the economy
-- USA listed fluorspar as a critical mineral in 2018 -- China listed fluorspar as a strategic mineral in 2017
-- Imbalance between production and consumption in China causing supply gap - to be filled by new fluorspar producers outside China
Based on macroeconomic drivers the Company continues to be strategically placed to capitalise on the supply gap in the future by developing its 100% owned large fluorspar assets, containing fluorspar resources of 13.1 million tonnes, located in the key markets of the USA and Europe.
*The information in this Fluorspar Market Summary is drawn from various sources, including Industrial Minerals Magazine/Fastmarkets IM, United States Geological Survey, Roskill, IHS, UN Comtrade, industry sources, Xenops and CRU. CAGR - Compound annual growth rate.
Financial Review & Performance
The Group is currently in the earlier stages of the typical mining development cycle and so has no income other than cost recovery from the management contract with Sunrise Resources plc and a small amount of bank interest. Consequently the Group is not expected to report profits until it is able to profitably develop, dispose of, or otherwise commercialise its exploration and development projects.
The Group reports a loss of GBP2,267,197 for the year (2017: GBP395,532) after administration costs of GBP507,931 (2017: GBP550,229) and after crediting interest receivable of GBP142 (2017: GBP277). The loss includes impairment of the Storuman Project of GBP1,976,618, expensed pre-licence and reconnaissance exploration costs of GBP38,725 (2017: GBP30,617) and impairment of available for sale investment (the Company's share in Sunrise Resources plc) of GBPNil (2017: GBP55,987). Administration costs include GBP8,997 (2017: GBP11,396) as non-cash costs for the value of certain share warrants held by employees as required by IFRS 2. The pre-tax loss is net of gains on disposal of available for sale equity share investments of GBP37,094.
Revenue includes GBP218,841 (2017: GBP204,110) from the provision of management, administration and office services provided to Sunrise Resources plc, to the benefit of both companies through efficient utilisation of services.
The financial statements show that, at 30 September 2018, the Group had net current assets of GBP249,787 (2017: GBP177,723). This represents the cash position after allowing for receivables and trade and other payables. These amounts are shown in the Consolidated and Company Statements of Financial Position and are also components of the Net Assets of the Group. Net assets also include various "intangible" assets of the Company. As the name suggests, these intangible assets are not cash assets but include this year's and previous years' accrued expenditure on minerals projects where that expenditure meets the criteria in Note 1(d) accounting policies. The intangible assets total GBP2,670,386 (2017: GBP4,508,015) and the breakdown by project is shown in Note 2 to the Financial Statements.
Expenditure which does not meet the criteria in Notes 1(d) and 1(n), such as pre-licence and reconnaissance costs, are expensed and add to the Company's loss. The loss reported in any year can also include expenditure that was carried forward in previous reporting periods as an intangible asset but which the Board determines is "impaired" in the reporting period.
The extent to which expenditure is carried forward as intangible assets is a measure of the extent to which the value of the Company's expenditure is preserved.
The intangible asset value of a project does not equate to the realisable or market value of a particular project which will, in the Directors' opinion, be at least equal in value and often considerably higher. Hence the Company's market capitalisation on AIM can be in excess of or less than the net asset value of the Group.
Details of intangible assets, property, plant and equipment and investments are set out in Notes 8, 9 and 10 of the financial statements.
The Financial Statements of a mineral exploration company can provide a moment in time snapshot of the financial health of the Company but do not provide a reliable guide to the performance of the Company or its Board and its long-term potential to create value.
Key Performance Indicators
The usual financial key performance indicators ("KPIs") are neither applicable nor appropriate to measurement of the value creation of a company involved in mineral exploration and which currently has no turnover other than cost recovery. The Directors consider that the detailed information in the Operating Review is the best guide to the Group's progress and performance during the year.
The Company does seek to reduce overhead costs, where practicable, and is reporting reduced administration costs this financial year - current year GBP507,931 (2017: GBP550,229).
Fundraising
During the 2018 financial year the Company raised a total of GBP500,000, before expenses, as shown in Note 14 of the Financial Statements.
The Directors prepare annual budgets and cash flow projections that extend beyond 12 months from the date of this report. Given the Group's cash position at year end (GBP218,297), these projections include the proceeds of future fundraising necessary within the next 12 months to meet the Group's overheads and planned discretionary project expenditures and to maintain the Company and its subsidiaries as going concerns.
Impairment
A biannual review is carried out by the directors to assess whether there are any indications of impairment of the Group's assets.
A review of exploration assets for indication of impairment under IFRS 6 and IAS 36 resulted in an impairment charge in Tertiary Gold Limited, relating to the Storuman Fluorspar Project, being recognised in the Consolidated Income Statement as part of operating expenses, with a commensurate reduction in the carrying value of intangible assets. Consequently, the value of the Company's investment in and due from its subsidiaries was considered. Being in excess of the market value of the Group at year end, this indicated a potential impairment under IAS 36 12(d). The directors therefore undertook an impairment review of the carrying values of the investments, with particular reference to Tertiary Gold Limited. The result of this review, together with the fact that there had been an impairment of the underlying assets held by Tertiary Gold Limited, indicated that impairment was required in the carrying value of the investment in Tertiary Gold Limited. The investment has been impaired down to the value of the underlying exploration and development assets, i.e. an impairment of GBP4,681,523 (Note 10).
A review of available for sale investment assets for indication of impairment under IAS 39 was carried out by the directors. Available for sale assets at year end comprised investment in shares of Sunrise Resources plc.
The nature of the activity of Sunrise Resources plc is similar to that of Tertiary Minerals plc in that it is involved in long-term mineral development and exploration. The projects within the company will typically take over five years to develop before they can be commercially exploited and until the end of a project it is expected that there will be volatility in the share price of the company.
The overall revaluation of Sunrise Resources plc has been negative since 5 November 2012 and at March 2017 the decline was considered, under IAS 39, to be prolonged and significant, resulting in further impairment in addition to that of previous periods. At the last review the share price had recovered to a level which did not necessitate impairment in the current period. Under the terms of IAS 39, previous impairment of available for sale assets cannot be reversed.
Risks & Uncertainties
The Board regularly reviews the risks to which the Group is exposed and ensures through its meetings and regular reporting that these risks are minimised as far as possible.
The principal risks and uncertainties facing the Group at this stage in its development and in the foreseeable future are detailed overleaf together with risk mitigation strategies employed by the Board.
RISK MITIGATION STRATEGIES
Exploration Risk
The directors bring many years
The Group's business is mineral of combined mining and exploration
exploration and evaluation which experience and an established track
are speculative activities. There record in mineral discovery.
is no certainty that the Group The Company currently targets advanced
will be successful in the definition and drill ready exploration projects
of economic mineral deposits, in order to avoid higher risk grass
or that it will proceed to the roots exploration.
development of any of its projects
or otherwise realise their value.
-----------------------------------------
Resource Risk
Resources and reserves are estimated
All mineral projects have risk by independent specialists on behalf
associated with defined grade of the Group in accordance with
and continuity. Mineral Reserves accepted industry standards and
are always subject to uncertainties codes. The Directors are realistic
in the underlying assumptions in the use of mineral price forecasts
which include geological projections and impose rigorous practices in
and metal/mineral assumptions. the QA/QC programmes that support
its independent estimates.
Development Risk
Delays in permitting, or changes In order to reduce development
in permit legislation and/or regulation, risk in future, the directors will
financing and commissioning a ensure that its permit application
project may result in delays to processes and financing applications
the Group meeting production targets are robust and thorough.
or even the Company ultimately
not receiving the required permits
and in extreme cases loss of title.
------------------------------------------
Commodity Risk
Changes in commodity prices can The Company consistently reviews
affect the economic viability commodity prices and trends for
of mining projects and affect its key projects throughout the
decisions on continuing exploration development cycle.
activity.
------------------------------------------
Mining and Processing Technical
Risk From the earliest stages of exploration
the Directors look to use consultants
Notwithstanding the completion and contractors who are leaders
of metallurgical testwork, test in their field and in future will
mining and pilot studies indicating seek to strengthen the executive
the technical viability of a mining and the Board with additional technical
operation, variations in mineralogy, and financial skills as the Company
mineral continuity, ground stability, transitions from exploration to
groundwater conditions and other production.
geological conditions may still
render a mining and processing
operation economically or technically
non-viable.
------------------------------------------
Environmental Risk
Mineral exploration carries a lower
Exploration and development of level of environmental liability
a project can be adversely affected than mining. The Company has adopted
by environmental legislation and an Environmental Policy and the
the unforeseen results of environmental directors avoid the acquisition
studies carried out during evaluation of projects where liability for
of a project. Once a project is legacy environmental issues might
in production unforeseen events fall upon the Company.
can give rise to environmental
liabilities.
------------------------------------------
Political Risk
All countries carry political The Company's strategy currently
risk that can lead to interruption restricts its activities to stable,
of activity. Politically stable democratic and mining friendly
countries can have enhanced environmental jurisdictions.
and social permitting risks, risks
of strikes and changes to taxation, The Company has adopted a strong
whereas less developed countries Anti-corruption Policy and Code
can have, in addition, risks associated of Conduct and this is strictly
with changes to the legal framework, enforced.
civil unrest and government expropriation
of assets.
------------------------------------------
Partner Risk
Whilst there has been no past The Company currently maintains
evidence of this, the Group can control of certain key projects
be adversely affected if joint so that it can control the pace
venture partners are unable or of exploration and reduce partner
unwilling to perform their obligations risk.
or fund their share of future
developments. For projects where other parties
are responsible for critical payments
and expenditures the Company's
agreements legislate that such
payments and expenditures are met.
Financing & Liquidity Risk
Liquidity risk is the risk that The Company maintains a good network
the Company will not be able to of contacts in the capital markets
raise working capital for its that has historically met its financing
ongoing activities. requirements.
The Group's goal is to finance The Company's low overheads and
its exploration and evaluation cost-effective exploration strategies
activities from future cash flows, help reduce its funding requirements.
but until that point is reached Nevertheless further equity issues
the Company is reliant on raising will be required over the next
working capital from equity markets 12 months.
or from industry sources.
There is no certainty such funds
will be available when needed.
-----------------------------------------------
Financial Instruments
The directors are responsible for
Details of risks associated with the Group's systems of internal
the Group's Financial Instruments financial control. Although no
are given in Note 19 to the financial systems of internal financial control
statements. can provide absolute assurance
against material misstatement or
loss, the Group's systems are designed
to provide reasonable assurance
that problems are identified on
a timely basis and dealt with appropriately.
In carrying out their responsibilities,
the Directors have put in place
a framework of controls to ensure
as far as possible that ongoing
financial performance is monitored
in a timely manner, that corrective
action is taken and that risk is
identified as early as practically
possible, and they have reviewed
the effectiveness of internal financial
control.
The Board, subject to delegated
authority, reviews capital investment,
property sales and purchases, additional
borrowing facilities, guarantees
and insurance arrangements.
-----------------------------------------------
Forward-Looking Statements
This Annual Report may contain certain statements and expressions of belief, expectation or opinion which are forward-looking statements, and which relate, inter alia, to the Company's proposed strategy, plans and objectives or to the expectations or intentions of the Company's directors. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the control of the Company that could cause the actual performance or achievements of the Company to be materially different from such forward-looking statements.
This Strategic Report was approved by the Board of Directors on 11 December 2018 and signed on its behalf.
Richard Clemmey
Managing Director
Our Governance
Corporate Governance Statement
There is no prescribed corporate governance code for AIM companies and London Stock Exchange prefers to give companies the flexibility to choose from a range of codes which suit their specific stage of development, sector and size.
The Board considers the corporate governance code published by Quoted Companies Alliance Corporate Governance Code 2018 ("the QCA Code") for small and mid-sized quoted companies to be the most suitable code for the Company and has adopted the principles set out in the QCA Code and applies these principles wherever possible, and where appropriate to its size and available resources.
The Chairman, Patrick Cheetham, has overall responsibility for the Corporate Governance of the Company. This Corporate Governance Statement was approved by the Board on 17 August 2018.
The QCA Code sets out ten principles which should be applied. The principles are listed below with an explanation of how the Company applies each principle and/or the reasons for any aspect of non-compliance.
Principle One: Establish a strategy and business model which promote long-term value for shareholders.
The Company has a clearly defined strategy and business model that has been adopted by the Board and is set out in the Strategic Report.
Principle Two: Seek to understand and meet shareholder needs and expectations.
All shareholders are encouraged to attend the Annual General Meeting where they can meet and directly communicate with the Board. Shareholders are welcome to contact the Company via email at info@tertiaryminerals.com with any specific queries.
The Company also provides regulatory, financial and business news updates through the Regulatory News Service (RNS) and various media channels such as Twitter. Shareholders also have access to information through the Company's website, www.tertiaryminerals.com, which is updated on a regular basis.
Principle Three: Take into account wider stakeholder and social responsibilities and their implications for long-term success.
The Board takes regular account of the significance of social, environmental and ethical matters affecting the business of the Group. At this stage in the Group's development, the Board has not adopted a specific written policy on Corporate Social Responsibility as it has a limited pool of stakeholders other than its shareholders. Rather, the Board seeks to protect the interests of the Group's stakeholders (both internal and external to the Group) through individual policies and through ethical and transparent actions. The Company engages positively with local communities and stakeholders in its project locations and encourages feedback through this engagement.
Principle Four: Embed effective risk management, considering both opportunities and threats, throughout the organisation.
The Board regularly reviews the risks to which the Group is exposed and ensures through its meetings and regular reporting that these risks are minimised as far as possible whilst recognising that its business opportunities carry an inherently high level of risk. The principal risks and uncertainties facing the Group at this stage in its development and in the foreseeable future together with risk mitigation strategies employed by the Board are detailed in the Strategic Report.
Principle Five: Maintain the board as a well-functioning, balanced team led by the chair.
The Board's role is to agree the Group's long-term direction and strategy and monitor achievement of its business objectives. The Board meets formally four times a year for these purposes and holds additional meetings when necessary to transact other business. The Board receives reports for consideration on all significant strategic, operational and financial matters.
The Board is supported by the Audit, Remuneration and Nomination Committees.
The Board currently consists of the Chairman, Managing Director and one Non-Executive Director. The current Board's preference is that independent Non-Executive directors are equally represented or comprise the majority of Board members. However, due to the untimely death of the Company's second Non-Executive Director, David Whitehead, in November 2017 this is not currently the case. However, the Company intends that a replacement will be appointed in due course. When there are two Non-Executive directors in post, the Board considers that the structure is nevertheless acceptable having regard to the fact that it is not yet revenue-earning.
Despite serving as a Non-Executive Director for more than nine years, Donald McAlister is considered independent of management and free from any business or other relationship which could materially interfere with the exercise of his independent judgement. In compliance with good practice, he will continue to seek annual re-election rather than every third year as per the Articles of Association.
Attendance at Board and Committee Meetings
The Board retains full control of the Group with day-to-day operational control delegated to Executive Directors. The full Board meets four times a year and on any other occasions it considers necessary. During 2018 there were nine Board meetings, two Remuneration Committee meetings, two Audit Committee meetings and one Nomination Committee meeting. All meetings were attended by their constituent directors.
Principle Six: Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities.
The Board considers the current balance of sector, financial and public market skills and experience appropriate given the current size and stage of development of the Company and that the Board has the skills and experience necessary to execute the Company's strategy and business plan and discharge its duties effectively.
The directors maintain their skills through membership of various professional bodies, attendance at mining conferences and through their various external appointments.
All Directors have access to the Company Secretary who is responsible for ensuring that Board procedures and applicable rules and regulations are observed.
The Board and its committees will also seek external expertise and advice where required.
Principle Seven: Evaluate board performance based on clear and relevant objectives, seeking continuous improvement.
The ultimate measure of the effectiveness of the Board is the Company's progress against the long-term strategy and aims of the business. This progress is reviewed in Board meetings held at least four times a year. The Managing Director's performance is reviewed once a year by the rest of the Board, and measured against a definitive list of short, medium and long-term strategic targets set by the Board.
The Nomination Committee, currently consisting of the Chairman, Managing Director and one Non-Executive Director, meets once a year to lead the formal process of rigorous and transparent procedures for Board appointments. During this meeting the Nomination Committee review the structure, size and composition of the Board; succession planning; leadership; key strategic and commercial issues; conflicts of interest; time required from Non-Executive directors to execute their duties effectively; overall effectiveness of the Board and its own terms of reference.
Principle Eight: Promote a corporate culture that is based on ethical values and behaviours.
The Board recognises and strives to promote a corporate culture based on strong ethical and moral values. The corporate culture of the Company is promoted throughout its workforce, suppliers and contractors and is underpinned by the implementation and regular review, enforcement and documentation of various policies: Health and Safety Policy; Environmental Policy; Share Dealing Policy; Anti-Corruption Policy and Code of Conduct; Privacy and Cookies Policy and Social Media Policy.
Employees
The Group encourages its employees to understand all aspects of the Group's business and seeks to remunerate its employees fairly, being flexible where practicable. The Group gives full and fair consideration to applications for employment received regardless of age, gender, colour, ethnicity, disability, nationality, religious beliefs, transgender status or sexual orientation. The Board takes account of employees' interests when making decisions, and suggestions from employees aimed at improving the Group's performance are welcomed.
Suppliers and Contractors
The Group recognises that the goodwill of its contractors, consultants and suppliers is important to its business success and seeks to build and maintain this goodwill through fair dealings. The Group has a prompt payment policy and seeks to settle all agreed liabilities within the terms agreed with suppliers. The amount shown in the Consolidated and Company Statements of Financial Position in respect of trade payables at the end of the financial year represents 15 days of average daily purchases (2017: 8 days).
Anti-Corruption Policy and Code of Conduct
The Company has adopted and implements an Anti-Corruption Policy and Code of Conduct.
Health and Safety
The Board recognises it has a responsibility to provide strategic leadership and direction in the development of the Group's health and safety strategy in order to protect all of its stakeholders. The Company has developed and implements a Health and Safety Policy to clearly define roles and responsibilities and in order to identify and manage risk.
Principle Nine: Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board.
The Board has overall responsibility for all aspects of the business. The Chairman is responsible for overseeing the running of the Board, ensuring that no individual or group dominates the Board's decision-making and ensuring the Non-Executive Directors are properly briefed on all operational and financial matters. The Chairman has overall responsibility for corporate governance matters in the Group and chairs the Nomination Committee. The Managing Director has the responsibility for implementing the strategy of the Board and managing the day-to-day business activities of the Group. The Company Secretary is responsible for ensuring that Board procedures are followed and applicable rules and regulations are complied with.
Non-Executive Director, Donald McAlister, is responsible for bringing independent and objective judgment to Board decisions. The Board has established an Audit and Remuneration Committee with formally delegated duties and responsibilities. Donald McAlister currently chairs the Audit and Remuneration Committee.
Audit Committee
The Audit Committee, composed entirely of Non-Executive Directors, meets at least twice a year and assists the Board in meeting responsibilities in respect of external financial reporting and internal controls. The Audit Committee also keeps under review the scope and results of the audit. It also considers the cost-effectiveness, independence and objectivity of the Auditor taking account of any non-audit services provided by them.
Remuneration Committee
The Remuneration Committee also comprises the Non-Executive Directors. The Remuneration Committee meets at least once a year to determine the appropriate remuneration for the Company's executive directors, ensuring that this reflects their performance and that of the Group, and to demonstrate to shareholders that executive remuneration is set by Board members who have no personal interest in the outcome of their decisions.
The Company has initiated a long-term bonus and incentive scheme for the Managing Director. The objective of adopting the scheme is to provide reward for successfully achieving performance targets set by the Board of Directors in line with the Company's Aims and Strategy. The Company has in place an Inland Revenue approved share option scheme and also issues warrants to subscribe for shares to executive directors and employees. Directors' emoluments are disclosed in Note 4 to the financial statements and details of Directors' warrants are disclosed in Note 15.
Conflicts of Interest
The Companies Act 2006 permits directors of public companies to authorise directors' conflicts and potential conflicts, where appropriate, and the Articles of Association contain a provision to this effect.
At 30 September 2018, Tertiary Minerals plc held 5.19% of the issued share capital of Sunrise Resources plc and the Chairman of Tertiary Minerals plc is also Chairman of Sunrise Resources plc. Tertiary Minerals plc also provides management services to Sunrise Resources plc, in the search, evaluation and acquisition of new projects.
Procedures are in place in order to avoid any conflict of interest between the Company and Sunrise Resources plc.
Principle Ten: Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.
The Company regularly communicates with, and encourages feedback from, its various stakeholder groups. The Company's website is regularly updated and users can register to be alerted via email when certain announcements are made.
The Group's financial reports can be found here: www.tertiaryminerals.com/investor-media/financial-reports
Notices of General Meetings held for at least the past five years can be found here: www.tertiaryminerals.com/news-releases
The results of voting on all resolutions in future general meetings will be posted to the Company's website, including any actions to be taken as a result of resolutions for which votes against have been received from at least 20 per cent of independent votes.
This Corporate Governance statement will be reviewed at least annually to ensure that the Company's corporate governance framework evolves in line with the Company's strategy and business plan.
Patrick Cheetham
Executive Chairman
11 December 2018
Board of Directors
The Directors and Officers of the Company during the financial year were:
Patrick Cheetham (58)
Chairman
Key Strengths and Experience
-- Geologist. -- 37 years' experience in mineral exploration. -- 32 years' experience in public company management. -- Founder of the Company, Dragon Mining Ltd, Archaean Gold NL and Sunrise Resources plc.
External Appointments
Chairman and founder of Sunrise Resources plc.
Richard Clemmey (46)
Managing Director
Key Strengths and Experience
-- Chartered Engineer.
-- 25 years' experience in developing and managing mining/quarrying projects worldwide for Derwent Mining, Lafarge, Hargreaves (GB) Ltd, Marshalls plc and CFE.
-- Board Director since May 2012.
External Appointments
None.
Donald McAlister (59)
Non-Executive Director*
Key Strengths and Experience
-- Accountant. -- Previously Finance Director at Mwana Africa plc, Ridge Mining plc and Reunion Mining.
-- 24 years' experience in all financial aspects of the resource industry, including metal hedging, tax planning, economic modelling/evaluation, project finance and IPOs.
-- Founding director of the Company.
External Appointments
Financial Director of Moxico Resources plc and Finance Director of ZincOx Resources plc.
* Chairman of the Audit Committee and member of the Remuneration Committee.
David Whitehead (now deceased)
Non-Executive Director
During part of the last financial year David Whitehead operated as a non-executive director but he sadly passed away in November 2017. The Board will be seeking a replacement in due course.
Colin Fitch LLM, FCIS
Company Secretary
Key Strengths and Experience
-- Barrister-at-Law.
-- Previously Corporate Finance Director of Kleinwort Benson, Partner and Head of Corporate Finance at Rowe & Pitman (SG Warburg Securities) and Assistant Company Secretary at the London Stock Exchange.
-- Held a number of non-executive directorships including Merrydown plc, African Lakes plc and Manders plc.
External Appointments
Company Secretary for Sunrise Resources plc.
Directors' Responsibilities
The Directors are responsible for preparing the Strategic Report, the Directors' Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group and Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and applicable law. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that period. The Directors are also required to prepare financial statements in accordance with the AIM Rules of the London Stock Exchange for companies trading securities on the AIM Market.
In preparing these financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently; -- make judgements and accounting estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements; and
-- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company and the Group will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
They are further responsible for ensuring that the Strategic Report and the Report of the Directors and other information included in the Annual Report and Financial Statements is prepared in accordance with applicable law in the United Kingdom.
Website Publication
The maintenance and integrity of the Tertiary Minerals plc website is the responsibility of the Directors; the work carried out by the Auditors does not involve the consideration of these matters and, accordingly, the Auditors accept no responsibility for any changes that may have occurred in the accounts since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of the accounts and the other information included in annual reports may differ from legislation in other jurisdictions.
Information from the Directors' Report
The Directors are pleased to submit their Annual Report and audited accounts for the year ended 30 September 2018.
The Strategic Report contains details of the principal activities of the Company and includes the Operating Review and Performance which provides detailed information on the development of the Group's business during the year and indications of likely future developments.
Going Concern
In common with many exploration companies, the Company raises finance for its exploration and appraisal activities in discrete tranches. Further funding is raised as and when required. When any of the Group's projects move to the development stage, specific project financing will be required.
The Directors prepare annual budgets and cash flow projections that extend beyond 12 months from the date of this report. Given the Group's cash position at year end (GBP218,297), these projections include the proceeds of future fundraising necessary within the next 12 months to meet the Company's and Group's overheads and planned discretionary project expenditures and to maintain the Company and Group as going concerns. Although the Company has been successful in raising finance in the past, there is no assurance that it will obtain adequate finance in the future. This represents a material uncertainty related to events or conditions which may cast significant doubt on the Group and Company's ability to continue as going concerns and, therefore, that they may be unable to realise their assets and discharge their liabilities in the normal course of business. However, the Directors have a reasonable expectation that they will secure additional funding when required to continue meeting corporate overheads and exploration costs for the foreseeable future and therefore believe that the going concern basis is appropriate for the preparation of the financial statements.
Dividend
The Directors are unable to recommend the payment of a dividend.
Financial Instruments & Other Risks
Details of the Group's Financial Instruments and risk management objectives and of the Group's exposure to risk associated with its Financial Instruments is given in Note 19 to the financial statements.
The business of mineral exploration and evaluation has inherent risks. Details of risks and uncertainties that affect the Group's business are given in Risks and Uncertainties in the Strategic Report.
Directors
The Directors currently holding office are:
Mr P L Cheetham
Mr R H Clemmey
Mr D A R McAlister
In addition, Mr D Whitehead (now deceased) was a non-executive director during part of the financial year.
Post Balance Sheet Events
There were no post balance sheet events
Shareholders
As at the date of this report the following interests of 3% or more in the issued share capital of the Company appeared in the share register:
Number % of share
As at 11 December 2018 of shares capital
Interactive Investor Services Nominees Limited
SMKTNOMS 38,896,483 10.82
---------- ----------
Barclays Direct Investing Nominees Limited
CLIENT1 32,315,054 8.99
---------- ----------
Interactive Investor Services Nominees Limited
SMKTISAS 21,022,090 5.85
---------- ----------
Hargreaves Lansdown (Nominees) Limited 15942 19,446,657 5.41
---------- ----------
Hargreaves Lansdown (Nominees) Limited VRA 17,684,315 4.92
---------- ----------
HSDL Nominees Limited MAXI 14,241,816 3.96
---------- ----------
HSDL Nominees Limited 13,003,446 3.62
---------- ----------
Hargreaves Lansdown (Nominees) Limited HLNOM 12,909,505 3.59
---------- ----------
Share Nominees Ltd 12,631,309 3.52
---------- ----------
HSBC Client Holdings Nominee (UK) Limited
731504 10,857,913 3.02
---------- ----------
Disclosure of Audit Information
Each of the Directors has confirmed that so far as he is aware, there is no relevant audit information of which the Company's Auditor is unaware, and that he has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.
Auditor
A resolution to re-appoint Crowe U.K. LLP as Auditor of the Company and the Group will be proposed at the forthcoming Annual General Meeting.
Charitable and Political Donations
During the year, the Group made no charitable or political donations.
Annual General Meeting
The Annual General Meeting will be held on Thursday 21 February 2018 at 2.30 p.m.
Approved by the Board of Directors on 11 December 2018 and signed on its behalf.
Richard Clemmey
Managing Director
Publication of Statutory Accounts
The financial information set out in this announcement does not constitute the Company's Annual Accounts for the period ended 30 September 2018 or 2017. The financial information for 2017 is derived from the Statutory Accounts for 2017. Full audited accounts in respect of that financial period have been delivered to the Registrar of Companies. The Statutory Accounts for 2018 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The Auditors have reported on the 2018 and 2017 accounts. Neither set of accounts contain a statement under section 498(2) of (3) the Companies Act 2006 and both received an unqualified audit opinion. However, there was an emphasis of matter in relation to a requirement that the Company raise funds in the future to continue as a going concern.
Availability of Financial Statements
The Annual Report containing the full financial statements for the year to 30 September 2018 will be posted to shareholders on or around 21 December 2018, a soft copy of which will then be available to download from the Company's website: https://www.tertiaryminerals.com.
Consolidated Income Statement
for the year ended 30 September 2018
2018 2017
Notes GBP GBP
--------------------------------------------------- ----- ----------- ---------
Revenue 2,17 218,841 241,024
Administration costs (507,931) (550,229)
Pre-licence exploration costs (38,725) (30,617)
Impairment of deferred exploration asset 8 (1,976,618) -
Operating loss (2,304,433) (339,822)
Impairment of available for sale investment - (55,987)
Gain on disposal of available for sale investment 37,094 -
Interest receivable 142 277
--------------------------------------------------- ----- ----------- ---------
Loss before income tax 3 (2,267,197) (395,532)
Income tax 7 - -
--------------------------------------------------- ----- ----------- ---------
Loss for the year attributable to equity holders
of the parent (2,267,197) (395,532)
--------------------------------------------------- ----- ----------- ---------
Loss per share - basic and diluted (pence) 6 (0.65) (0.14)
--------------------------------------------------- ----- ----------- ---------
All amounts relate to continuing activities.
Consolidated Statement of Comprehensive Income
for the year ended 30 September 2018
2018 2017
GBP GBP
------------------------------------------------------ ------------- -----------
Loss for the year (2,267,197) (395,532)
------------------------------------------------------ ------------- -----------
Items that could be reclassified subsequently to
the income statement:
Foreign exchange translation differences on foreign
currency net investments in subsidiaries (62,575) (15,442)
Fair value movement on available for sale investment
reserve (72,010) 122,753
------------------------------------------------------ ------------- -----------
(134,585) 107,311
------------------------------------------------------ ------------- -----------
Items that have been reclassified subsequently to
the income statement:
Disposal from available for sale investment reserve (38,634) -
------------------------------------------------------ ------------- -----------
(38,634) -
------------------------------------------------------ ------------- -----------
Total comprehensive loss for the year attributable
to
equity holders of the parent (2,440,416) (288,221)
------------------------------------------------------ ------------- -----------
Consolidated and Company Statements of Financial Position
at 30 September 2018
Company Number 03821411
Group Company Group Company
2018 2018 2017 2017
Notes GBP GBP GBP GBP
----------------------------------- ----- ------------ ----------- ----------- -----------
Non-current assets
Intangible assets 8 2,670,386 - 4,508,015 -
Property, plant & equipment 9 3,308 3,308 4,361 4,341
Investment in subsidiaries 10 - 2,478,924 - 7,035,229
Available for sale investment 10 202,328 202,328 408,971 266,087
----------------------------------- ----- ------------ ----------- ----------- -----------
2,876,022 2,684,560 4,921,347 7,305,657
----------------------------------- ----- ------------ ----------- ----------- -----------
Current assets
Receivables 11 96,653 72,749 94,253 73,390
Cash and cash equivalents 12 218,297 202,732 159,278 140,928
314,950 275,481 253,531 214,318
----------------------------------- ----- ------------ ----------- ----------- -----------
Current liabilities
Trade and other payables 13 (65,163) (38,602) (75,808) (41,281)
----------------------------------- ----- ------------ ----------- ----------- -----------
Net current assets 249,787 236,879 177,723 173,037 ----------------------------------- ----- ------------ ----------- ----------- ----------- Net assets 3,125,809 2,921,439 5,099,070 7,478,694 ----------------------------------- ----- ------------ ----------- ----------- ----------- Equity Called up Ordinary Shares 14 35,932 35,932 31,708 31,708 Deferred Shares 14 2,644,062 2,644,062 2,644,062 2,644,062 Share premium account 9,785,702 9,785,702 9,331,768 9,331,768 Merger reserve 131,096 131,096 131,096 131,096 Share option reserve 14 168,923 168,923 259,690 259,690 Available for sale investment reserve 63,226 63,226 173,870 115,987 Foreign currency reserve 14 304,337 - 366,912 - Accumulated losses (10,007,469) (9,907,502) (7,840,036) (5,035,617) ----------------------------------- ----- ------------ ----------- ----------- ----------- Equity attributable to the owners of the parent 3,125,809 2,921,439 5,099,070 7,478,694 ----------------------------------- ----- ------------ ----------- ----------- -----------
The Company reported a loss for the year ended 30 September 2018 of GBP4,971,649 (2017 - GBP366,439).
These financial statements were approved and authorised for issue by the Board of Directors on 11 December 2018 and were signed on its behalf.
R H Clemmey D A R McAlister Director Director
Consolidated Statement of Changes in Equity
Ordinary Share Share Available Foreign
share Deferred premium Merger option for sale currency Accumulated
capital shares account reserve reserve reserve reserve losses Total
Group GBP GBP GBP GBP GBP GBP GBP GBP GBP
--------------- ----------- ----------- ----------- ------- -------- --------- -------- ------------ -----------
At 30
September
2016 2,669,442 - 9,066,735 131,096 343,486 51,117 382,354 (7,539,696) 5,104,534
--------------- ----------- ----------- ----------- ------- -------- --------- -------- ------------ -----------
Loss for the
period - - - - - - - (395,532) (395,532)
Change in fair
value - - - - - 122,753 - - 122,753
Exchange
differences - - - - - - (15,442) - (15,442)
--------------- ----------- ----------- ----------- ------- -------- --------- -------- ------------ -----------
Total
comprehensive
loss for the
year - - - - - 122,753 (15,442) (395,532) (288,221)
--------------- ----------- ----------- ----------- ------- -------- --------- -------- ------------ -----------
Share split (2,644,062) 2,644,062 - - - - - - -
Share issue 6,328 - 265,033 - - - - - 271,361
Share based
payments
expense - - - - 11,396 - - - 11,396
Transfer of
expired
warrants - - - - (95,192) - - 95,192 -
--------------- ----------- ----------- ----------- ------- -------- --------- -------- ------------ -----------
At 30
September
2017 31,708 2,644,062 9,331,768 131,096 259,690 173,870 366,912 (7,840,036) 5,099,070
--------------- ----------- ----------- ----------- ------- -------- --------- -------- ------------ -----------
Loss for the
period - - - - - - - (2,305,831) (2,305,831)
Change in fair
value - - - - - (72,010) - - (72,010)
Transfer of
disposals to
income
statement - - - - - (38,634) - 38,634 -
Exchange
differences - - - - - - (62,575) - (62,575)
--------------- ----------- ----------- ----------- ------- -------- --------- -------- ------------ -----------
Total
comprehensive
loss for the
year - - - - - (110,644) (62,575) (2,267,197) (2,440,416)
--------------- ----------- ----------- ----------- ------- -------- --------- -------- ------------ -----------
Share issue 4,224 - 453,934 - - - - - 458,158
Share based
payments
expense - - - - 8,997 - - - 8,997
Transfer of
expired
warrants - - - - (99,764) - - 99,764 -
--------------- ----------- ----------- ----------- ------- -------- --------- -------- ------------ -----------
At 30
September
2018 35,932 2,644,062 9,785,702 131,096 168,923 63,226 304,337 (10,007,469) 3,125,809
--------------- ----------- ----------- ----------- ------- -------- --------- -------- ------------ -----------
Company Statement of Changes in Equity
Ordinary Share Share Available
share Deferred premium Merger option for sale Accumulated
capital shares account reserve reserve reserve losses Total
Company GBP GBP GBP GBP GBP GBP GBP GBP
--------------------- ----------- ----------- --------- -------- -------- --------- ----------- -----------
At 30 September
2016 2,669,442 - 9,066,735 131,096 343,486 51,117 (4,764,370) 7,497,506
--------------------- ----------- ----------- --------- -------- -------- --------- ----------- -----------
Loss for the
period - - - - - - (366,439) (366,439)
Change in fair
value - - - - - 64,870 - 64,870
Total comprehensive
loss for the
year - - - - - 64,870 (366,439) (301,569)
--------------------- ----------- ----------- --------- -------- -------- --------- ----------- -----------
Share split (2,644,062) 2,644,062 - - - - - -
Share issue 6,328 - 265,033 - - - - 271,361
Share based
payments expense - - - - 11,396 - - 11,396
Transfer of
expired warrants - - - - (95,192) - 95,192 -
--------------------- ----------- ----------- --------- -------- -------- --------- ----------- -----------
At 30 September
2017 31,708 2,644,062 9,331,768 131,096 259,690 115,987 (5,035,617) 7,478,694
--------------------- ----------- ----------- --------- -------- -------- --------- ----------- -----------
Loss for the
period - - - - - (4,977,649) (4,977,649)
Change in fair
value - - - - - (46,761) - (46,761)
Transfer of
disposals to
income statement - - - - - (6,000) 6,000 -
Total comprehensive
loss for the
year - - - - - (52,761) (4,971,649) (5,024,410)
--------------------- ----------- ----------- --------- -------- -------- --------- ----------- -----------
Share issue 4,224 - 453,934 - - - - 458,158
Share based
payments expense - - - - 8,997 - - 8,997
Transfer of
expired warrants - - - - (99,764) - 99,764 -
--------------------- ----------- ----------- --------- -------- -------- --------- ----------- -----------
At 30 September
2018 35,932 2,644,062 9,785,702 131,096 168,923 63,226 (9,907,502) 2,921,439
--------------------- ----------- ----------- --------- -------- -------- --------- ----------- -----------
Consolidated and Company Statements of Cash Flows
for the year ended 30 September 2018
Group Company Group Company
2018 2018 2017 2017
Notes GBP GBP GBP GBP
------------------------------------------ ----- ----------- ----------- --------- ---------
Operating activity
Total loss after tax excluding
interest received (2,267,339) (4,985,875) (395,809) (374,085)
Depreciation charge 9 4,019 3,999 5,910 5,781
Shares issued in settlement
of outstanding wages 8,158 8,158 1,361 1,361
Share based payment charge 8,997 8,997 11,396 11,396
Impairment charge - deferred
exploration asset 1,976,618 - - -
Impairment charge - available
for sale investment - - 55,987 55,987
Non-cash additions to available
for sale investment - - (52,735) (52,735)
Gain on disposal of available
for sale investment (37,094) (5,830) - -
Increase/(decrease) in provision
for impairment of loans to subsidiaries 10 - 4,682,590 - (1,196)
(Increase)/decrease in receivables 11 (2,400) 641 10,779 7,987
(Decrease) in payables 13 (10,645) (2,679) (16,680) (12,143)
------------------------------------------ ----- ----------- ----------- --------- ---------
Net cash outflow from operating
activity (319,686) (289,999) (379,791) (357,647)
------------------------------------------ ----- ----------- ----------- --------- ---------
Investing activity
Interest received 142 14,226 277 7,646
Exploration and development
expenditures 8 (201,622) - (190,172) -
Disposal of development asset - - 15,000 -
Disposal of available for sale
investment 10 133,094 16,828 - -
Purchase of property, plant
& equipment 9 (2,966) (2,966) (486) (486)
Additional loans to subsidiaries 10 - (126,285) - (199,877)
Net cash outflow from investing
activity (71,352) (98,197) (175,381) (192,717)
------------------------------------------ ----- ----------- ----------- --------- ---------
Financing activity
Issue of share capital (net
of expenses) 450,000 450,000 270,000 270,000
Net cash inflow from financing
activity 450,000 450,000 270,000 270,000
------------------------------------------ ----- ----------- ----------- --------- ---------
Net increase/(decrease) in cash
and cash equivalents 58,962 61,804 (285,172) (280,364)
------------------------------------------ ----- ----------- ----------- --------- ---------
Cash and cash equivalents at
start of year 159,278 140,928 448,474 421,292
Exchange differences 57 - (4,024) -
------------------------------------------ ----- ----------- ----------- --------- ---------
Cash and cash equivalents at
30 September 12 218,297 202,732 159,278 140,928
------------------------------------------ ----- ----------- ----------- --------- ---------
Notes to the Financial Statements
for the year ended 30 September 2018
Background
Tertiary Minerals plc is a public company incorporated and domiciled in England. It is traded on the AIM market of the London Stock Exchange - EPIC: TYM.
The Company is a holding company for a number of companies (together, "the Group"). The Group's financial statements are presented in Pounds Sterling (GBP) which is also the functional currency of the Company.
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Group's financial statements.
1. Accounting policies
(a) Basis of preparation
The Financial Statements have been prepared on the basis of the recognition and measurement requirements of International Financial Reporting Standards (IFRS), as adopted by the European Union. They have also been prepared in accordance with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
(b) Going concern
In common with many exploration companies, the Company raises finance for its exploration and appraisal activities in tranches as and when required. When any of the Group's projects move to the development stage, specific project financing will be required.
The Directors prepare annual budgets and cash flow projections that extend beyond 12 months from the date of this report. Given the Group's cash position at year end (GBP218,297), these projections include the proceeds of future fundraising necessary within the next 12 months to meet the Group's overheads and planned discretionary project expenditure and to maintain the Company and its subsidiaries as going concerns. Although the Company has been successful in raising finance in the past, there is no assurance that it will obtain adequate finance in the future. This represents a material uncertainty related to events or conditions which may cast significant doubt on the Group and Company's ability to continue as going concerns and, therefore, that they may be unable to realise their assets and discharge their liabilities in the normal course of business. However, the Directors have a reasonable expectation that they will secure additional funding when required to continue meeting corporate overheads and exploration costs for the foreseeable future and therefore believe that the going concern basis is appropriate for the preparation of the financial statements.
(c) Basis of consolidation
Investments, including long-term loans, in subsidiaries are valued at the lower of cost or recoverable amount, with a biannual review for impairment.
The Group's financial statements consolidate the financial statements of Tertiary Minerals plc and its subsidiary undertakings eliminating inter-company balances and transactions.
In accordance with section 408 of the Companies Act 2006, Tertiary Minerals plc is exempt from the requirement to present its own Statement of Comprehensive Income. The amount of the loss for the financial year recorded within the financial statements of Tertiary Minerals plc is GBP4,971,649 (2017: GBP366,439). The loss for 2018 includes provision for impairment of its investment in subsidiary undertakings in the amount of GBP4,681,523 (Note 10).
(d) Intangible assets
Exploration and evaluation
Accumulated exploration and evaluation costs incurred in relation to separate areas of interest (which may comprise more than one exploration licence or exploration licence applications) are capitalised and carried forward where:
(1) such costs are expected to be recouped through successful exploration and development of the area, or alternatively by its sale; or
(2) exploration and/or evaluation activities in the area have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to the areas are continuing.
An annual review is carried out by the Directors to consider whether there are any indications of impairment in capitalised exploration and development costs. The biannual impairment reviews were conducted in April 2018 and November 2018.
Where an indication of impairment is identified, the relevant value is written off to the income statement in the period for which the impairment was identified. An impairment of exploration and development costs may subsequently be reversed in later periods should conditions allow.
Accumulated costs, where the Group does not yet have an exclusive exploration licence and in respect of areas of interest which have been abandoned, are written off to the income statement in the year in which the pre-licence expense was incurred or in which the area was abandoned.
Development
Exploration, evaluation and development costs are carried at the lower of cost and expected net recoverable amount. On reaching a mining development decision, exploration and evaluation costs are reclassified as development costs and all development costs on a specific area of interest will be amortised over the useful economic life of the projects, once they become income generating and the costs can be recouped.
(e) Property, plant & equipment
All property, plant and equipment assets are stated at cost less accumulated depreciation. Depreciation is provided by the Group on all property, plant and equipment, at rates calculated to write off the cost, less estimated residual value, of each asset evenly over its expected useful life, as follows:
Fixtures and fittings 20% to 33% per annum Straight-line basis
Computer equipment 33% per annum Straight-line basis
Useful life and residual value are reassessed annually.
(f) Available for sale investments
Available for sale financial assets include non-derivative financial assets that are either designated as such or do not qualify for inclusion in any of the other categories of financial assets. Available for sale investments are initially measured at cost and subsequently at fair value, being the equivalent of market value, with changes in value recognised in equity. Gains and losses arising from available for sale investments are recognised in the income statement when they are sold or impaired.
(g) Trade and other receivables and payables
Trade and other receivables and payables are measured at initial recognition at fair value and subsequently measured at amortised cost.
(h) Cash and cash equivalents
Cash and cash equivalents consist of cash at bank and in hand and short-term bank deposits with a maturity of three months or less.
(i) Deferred taxation
Deferred taxation, if applicable, is provided in full in respect of taxation deferred by temporary differences between the treatment of certain items for taxation and accounting purposes.
Deferred tax assets are recognised to the extent that they are regarded as recoverable.
(j) Revenue
Revenue is measured at the fair value of the consideration received or receivable and includes amounts receivable for services provided to Sunrise Resources plc net of discounts, VAT and other sales-related taxes.
(k) Foreign currencies
The Group's consolidated financial statements are presented in Pounds Sterling (GBP), being the functional currency of the Company, and the currency of the primary economic environment in which the Company operates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date.
For consolidation purposes, the net investment in foreign operations and the assets and liabilities of overseas subsidiaries, associated undertakings and joint arrangements, that have a functional currency different from the Group's presentation currency, are translated at the closing exchange rates. Income statements of overseas subsidiaries, that have a functional currency different from the Group's presentation currency, are translated at exchange rates at the date of transaction. Exchange differences arising on opening reserves are taken to the foreign currency reserve in equity.
(l) Leasing and hire purchase commitments
Rentals applicable to operating leases where substantially all the benefits and risks of ownership remain with the lessor are charged to the income statement on a straight-line basis.
(m) Share warrants and share based payments
The Company issues warrants and options to employees (including directors) and third parties. The fair value of the warrants and options is recognised as a charge measured at fair value on the date of grant and determined in accordance with IFRS 2, IAS 32 and IAS 39, adopting the Black-Scholes-Merton model. The fair value is charged to administrative expenses on a straight-line basis over the vesting period, together with a corresponding increase in equity, based on the management's estimate of shares that will eventually vest. The expected life of the options and warrants is adjusted based on management's best estimates, for the effects of non-transferability, exercise restrictions and behavioural considerations. The details of the calculation are shown in Note 15.
The Company also issues shares in order to settle certain liabilities, including partial settlement of outstanding directors fees. The fair value of shares issued is based on the closing mid-market price of the shares on the AIM Market on the day prior to the date of settlement and it is expensed on the date of settlement with a corresponding increase in equity.
(n) Judgements and estimations in applying accounting policies
In the process of applying the Group's accounting policies above, the Group has identified the judgemental areas that have the most significant effect on the amounts recognised in the financial statements:
Intangible assets - exploration and evaluation
Capitalisation of exploration and evaluation costs requires that costs be assessed against the likelihood that such costs will be recoverable against future exploitation or sale or alternatively, where activities have not reached a stage which permits a reasonable estimate of the existence of mineral reserves, a judgement that future exploration or evaluation should continue. This requires management to make estimates and judgements and to make certain assumptions, often of a geological nature, and most particularly in relation to whether or not an economically viable mining operation can be established in future. Such estimates, judgements and assumptions are likely to change as new information becomes available. When it becomes apparent that recovery of expenditure is unlikely the relevant capitalised amount is written off to the income statement.
Impairment
Impairment reviews for deferred exploration and evaluation costs are carried out on a project by project basis, with each project representing a potential single cash generating unit. The Group will review information produced by its exploration activities and consider whether the carrying value is impaired. Assessment of the impairment of assets is a judgement based on analysis of the probability of future cash flows from the relevant project, including consideration of:
(a) The period for which the entity has the right to explore in the specific area and whether this right will expire in the near future, and whether the right is expected to be renewed.
(b) Whether substantive expenditure on further exploration for and evaluation of mineral resources for the specific project is either budgeted or planned.
(c) Whether exploration for and evaluation of mineral resources on the specific project has led to the discovery of commercially viable quantities of mineral resources and whether the entity has decided to discontinue such activities on the project.
(d) Whether sufficient data exist to indicate that, although a development on the specific project is likely to proceed, the carrying amount of the exploration and evaluation asset is likely to be recovered in full from successful development of a mine or by the sale of the project.
Impairment reviews for investments in subsidiaries and available for sale assets are carried out on an individual basis. The Group reviews performance indicators of the investment, such as market share price, to indicate whether the carrying value is impaired. The results of the impairment review conducted during this year are detailed within Note 8.
Available for sale assets include a holding in Sunrise Resources plc as described in Note 10. In the Interim Financial Statements for the six month period to 31 March 2017 a reduction in share price from cost was considered significant in terms of value and as a result the asset was treated as impaired in line with the requirements of IAS 39. This treatment is despite the fact that directors do not believe that the underlying business of Sunrise Resources plc is impaired either economically or commercially. A subsequent increase in share price in the period to 30 September 2018 has been recognised in equity (see Note 1(f)).
Going concern
The preparation of financial statements requires an assessment of the validity of the going concern assumption. The validity of the going concern assumption is dependent on finance being available for the continuing working capital requirements of the Group. Based on the assumption that such finance will become available, the Directors believe that the going concern basis is appropriate for these accounts (see Note 1(b)).
Share warrants, share options and share based payments
The estimates of costs recognised in connection with the fair value of share options and share warrants require that management selects an appropriate valuation model and make decisions on various inputs into the model, including the volatility of its own share price, the probable life of the warrants and options before exercise, and behavioural considerations of warrant holders (see Note 1(m)).
(p) Standards, amendments and interpretations not yet effective
A number of new standards and amendments to standards and interpretations have been issued but are not yet effective and in some cases have not yet been adopted by the EU.
The directors do not expect that the adoption of these standards will have a material impact on the financial statements of the Group in future periods. Specifically, the adoption of IFRS 9 will have minimal impact for both the classification and measurement of existing financial instruments. As the Group does not have any turnover other than recharge of expenses, IFRS 15 will not have any significant impact on revenue recognition and related disclosures. Finally, the adoption of IFRS 16 will not have any impact on the financial statements of the Group as all lease contracts are for periods of less than one year.
2. Segmental analysis
The Chief Operating Decision Maker is the Board of Directors. The Board considers the business has one reportable segment, the management of exploration projects, which is supported by a Head Office function. For the purpose of measuring segmental profits and losses the exploration segment bears only those direct costs incurred by or on behalf of those projects. No Head Office cost allocations are made to this segment. The Head Office function recognises all other costs.
Exploration Head
projects office Total
2018 GBP GBP GBP
----------------------------------------------- ----------- --------- -----------
Consolidated Income Statement
Revenue - 218,841 218,841
----------------------------------------------- ----------- --------- -----------
Pre-licence exploration costs (38,725) - (38,725)
Impairment of deferred exploration asset (1,976,618) - (1,976,618)
Share-based payments - (8,997) (8,997)
Administration costs and other expenses - (498,934) (498,934)
----------------------------------------------- ----------- --------- -----------
Operating Loss (2,015,343) (289,090) (2,304,433)
Gain on disposal of available for sale
investment - 37,094 37,094
Bank interest received - 142 142
----------------------------------------------- ----------- --------- -----------
Loss before income tax (2,015,343) (251,854) (2,267,197)
Income tax - - -
----------------------------------------------- ----------- --------- -----------
Loss for the year attributable to equity
holders (2,015,343) (251,854) (2,267,197)
----------------------------------------------- ----------- --------- -----------
Non-current assets
Intangible assets:
Deferred exploration costs:
Kaaresselkä Gold Project, Finland 260,992 - 260,992
Kiekerömaa Gold Project, Finland 97,887 - 97,887
Lassedalen Fluorspar Project, Norway 430,616 - 430,616
MB Fluorspar Project, USA 1,880,891 - 1,880,891
----------------------------------------------- ----------- --------- -----------
2,670,386 - 2,670,386
Property, plant & equipment - 3,308 3,308
Available for sale investment - 202,328 202,328
----------------------------------------------- ----------- --------- -----------
2,670,386 205,636 2,876,022
----------------------------------------------- ----------- --------- -----------
Current assets
Receivables 23,780 72,873 96,653
Cash and cash equivalents - 218,297 218,297
23,780 291,170 314,950
----------------------------------------------- ----------- --------- -----------
Current liabilities
Trade and other payables (15,299) (49,864) (65,163)
Net current assets 8,481 241,306 249,787
----------------------------------------------- ----------- --------- -----------
Net assets 2,678,867 446,942 3,125,809
----------------------------------------------- ----------- --------- -----------
Other data
Deferred exploration additions 201,622 - 201,622
Exchange rate adjustments to deferred
exploration costs (62,633) - (62,633)
----------------------------------------------- ----------- --------- -----------
Exploration Head
projects office Total
2017 GBP GBP GBP
----------------------------------------------- ----------- --------- ---------
Consolidated Income Statement
Revenue 36,914 204,110 241,024
----------------------------------------------- ----------- --------- ---------
Pre-licence exploration costs (30,617) - (30,617)
Share-based payments - (11,396) (11,396)
Administration costs and other expenses - (538,833) (538,833)
----------------------------------------------- ----------- --------- ---------
Operating Loss 6,297 (346,119) (339,822)
Impairment of available for sale investment - (55,987) (55,987)
Bank interest received - 277 277
----------------------------------------------- ----------- --------- ---------
Loss before income tax 6,297 (401,829) (395,532)
Income tax - - -
----------------------------------------------- ----------- --------- ---------
Loss for the year attributable to equity
holders 6,297 (401,829) (395,532)
----------------------------------------------- ----------- --------- ---------
Non-current assets
Intangible assets:
Deferred exploration costs:
Kaaresselkä Gold Project, Finland 260,823 - 260,823
Kiekerömaa Gold Project, Finland 97,705 - 97,705
Lassedalen Fluorspar Project, Norway 407,050 - 407,050
Storuman Fluorspar Project, Sweden 2,015,865 - 2,015,865
MB Fluorspar Project, USA 1,726,572 - 1,726,572
----------------------------------------------- ----------- --------- ---------
4,508,015 - 4,508,015
Property, plant & equipment - 4,361 4,361
Available for sale investment - 408,971 408,971
----------------------------------------------- ----------- --------- ---------
4,508,015 413,332 4,921,347
----------------------------------------------- ----------- --------- ---------
Current assets
Receivables 20,830 73,423 94,253
Cash and cash equivalents - 159,278 159,278
20,830 232,701 253,531
----------------------------------------------- ----------- --------- ---------
Current liabilities
Trade and other payables (25,080) (50,728) (75,808)
Net current assets (4,250) 181,973 177,723
----------------------------------------------- ----------- --------- ---------
Net assets 4,503,765 595,305 5,099,070
----------------------------------------------- ----------- --------- ---------
Other data
Deferred exploration additions 190,172 - 190,172
Exchange rate adjustments to deferred
exploration costs (11,418) - (11,418)
----------------------------------------------- ----------- --------- ---------
3. Loss before income tax
2018 2017
GBP GBP
-------------------------------------------------------- ------ ------
The operating loss is stated after charging
Operating lease rentals - land and buildings 20,668 20,239
Depreciation - owned assets 4,019 5,910
Fees payable to the Group's Auditor for:
The audit of the Group's annual accounts 6,175 6,000
The audit of the Group's subsidiaries, pursuant
to legislation 3,087 3,000
Fees payable to the Group's Auditor and its associates
for other services:
Interim review of accounts 1,000 1,000
VAT review 2,250 0
Corporation tax fees 1,300 1,800
-------------------------------------------------------- ------ ------
4. Directors' emoluments
Remuneration in respect of Directors was as follows:
Income from
Net cost recharge to
to Group Sunrise Resources Total Total
2018 plc 2018 2017
GBP 2018 GBP GBP
GBP
-------------------------- ---------- ------------------ ------- -------
P L Cheetham (salary) 16,176 98,296 114,472 110,061
R H Clemmey (salary) 97,978 376 98,354 86,643
D A R McAlister (salary) 16,000 - 16,000 16,000
D Whitehead (deceased)
(salary) 2,500 - 2,500 15,000
132,654 98,672 231,326 227,704
-------------------------- ---------- ------------------ ------- -------
The above remuneration amounts do not include non-cash share based payments charged in these financial statements in respect of share warrants issued to the Directors amounting to GBP4,224 (2017: GBP7,509) or Employer's National Insurance contributions of GBP28,050 (2017: GBP25,985). During the year shares were issued to D A R McAlister having a market value of GBP2,720 at the time of issue in part settlement of outstanding directors fees.
The above remuneration amount for R H Clemmey includes a bonus of GBP12,500 (2017: GBP4,097). Bonus remuneration is applicable to performance in the previous financial year.
Pension contributions made during the year on behalf of Directors amounted to GBP599 (2017: GBP258).
The Directors are also the key management personnel. If all benefits are taken into account, the total key management personnel compensation would be GBP235,550 (2017: GBP235,213).
After recharge to Sunrise Resources plc, if all benefits are taken into account, the key management personnel net compensation cost to the Group would be GBP136,878 (2017: GBP142,449).
5. Staff costs
Total staff costs for the Group and Company, including directors,
were as follows:
Income from
Net cost recharge to
to Group Sunrise Resources Total Total
2018 plc 2018 2017
GBP 2018 GBP GBP
GBP
------------------------ ----------- ------------------ ------- -------
Wages and salaries 189,631 168,464 358,095 350,526
Social security costs 19,116 20,349 39,465 35,752
Share-based payments 8,997 - 8,997 11,396
------------------------ ----------- ------------------ ------- -------
217,744 188,813 406,557 397,674
------------------------ ----------- ------------------ ------- -------
The average monthly number of part-time and full-time 2018 2017
employees, including directors, employed by the Number Number
Group and Company during the year was as follows:
------------------------------------------------------ ------- -------
Technical employees 3 3
Administration employees (including non-executive
directors) 5 6
------------------------------------------------------ ------- -------
8 9
------------------------------------------------------ ------- -------
6. Loss per share
Loss per share has been calculated using the loss for the year
attributable to equity holders of the parent and the weighted
average number of ordinary shares in issue during the year.
2018 2017
------------------------------------------- ----------- -----------
Loss (GBP) (2,267,197) (395,532)
Weighted average ordinary shares in issue
(No.) 351,361,810 284,429,468
Basic and diluted loss per ordinary share
(pence) (0.65) (0.14)
------------------------------------------- ----------- -----------
The loss attributable to ordinary shareholders and weighted average number of ordinary shares for the purpose of calculating the diluted earnings per ordinary share are identical to those used for the basic earnings per ordinary share. This is because the exercise of share warrants and options would have the effect of reducing the loss per ordinary share and is therefore anti-dilutive. Deferred shares are excluded from the loss per share calculation as they have no attributable earnings.
7. Income tax
No liability to corporation tax arises for the year due to the Group recording a taxable loss (2017: GBPNil).
The tax credit for the period is lower than the credit resulting from the loss before tax at the standard rate of corporation tax in the UK - 19% (2017: 19%). The differences are explained below.
2018 2017
GBP GBP
----------------------------------------------- ----------- -----------
Tax reconciliation
Loss before income tax (2,267,197) (395,532)
----------------------------------------------- ----------- -----------
Tax at hybrid rate 19% (2017: 19.5%) (430,767) (77,129)
----------------------------------------------- ----------- -----------
Differences between capital allowances and
depreciation (110) 4,006
Expenditure disallowed for tax purposes 79,394 -
Pre-trading expenditure no longer deductible
for tax purposes 42,707 28,934
----------------------------------------------- ----------- -----------
Tax effect at 19% (2017: 19.5%) 23,178 6,423
----------------------------------------------- ----------- -----------
Unrelieved tax losses carried forward (407,589) (70,706)
----------------------------------------------- ----------- -----------
Tax recognised on loss - -
----------------------------------------------- ----------- -----------
Total losses carried forward for tax purposes (7,859,632) (5,714,426)
----------------------------------------------- ----------- -----------
Factors that may affect future tax charges
The Group has total losses carried forward of GBP7,859,632 (2017: GBP5,714,426). This amount would be charged to tax, thereby reducing tax liability, if sufficient profits were made in the future. The deferred tax asset has not been recognised as the future recovery is uncertain given the exploration status of the Group. The carried tax loss is adjusted each year for amounts that can no longer be carried forward.
8. Intangible assets
Deferred Deferred
exploration exploration
expenditure expenditure
2018 2017
Group GBP GBP
------------------------------- ------------ ------------
Cost
At start of year 5,870,493 5,691,739
Additions 201,622 190,172
Exchange adjustments (62,633) (11,418)
------------------------------- ------------ ------------
At 30 September 6,009,482 5,870,493
------------------------------- ------------ ------------
Disposals
At start of year (1,362,478) (1,262,478)
Impairment losses during year (1,976,618) -
Disposals during year - (100,000)
------------------------------- ------------ ------------
At 30 September (3,339,096) (1,362,478)
------------------------------- ------------ ------------
Carrying amounts
At 30 September 2,670,386 4,508,015
------------------------------- ------------ ------------
At start of year 4,508,015 4,429,261
------------------------------- ------------ ------------
The directors carried out an impairment review which, with reference to IFRS 6.20(b) and IAS 36.12(b), resulted in an impairment charge, relating to the Tertiary Gold Limited Storuman Fluorspar Project, being recognised in the Consolidated Income Statement as part of operating expenses. Refer to accounting policy 1(d) and 1(n) for a description of the considerations used in the impairment review.
The key reasons for the impairment of the Storuman Project relate to the fact that the County Administrative Board has advised against the grant of the Mine Permit in its current from and that all further expenditure on exploration or development of the project is currently on hold.
As a result of the impairment review the directors concluded to impair the carrying value of the project fully.
9. Property, plant & equipment
Group Company Group Company
fixtures fixtures fixtures fixtures
and fittings and fittings and fittings and fittings
2018 2018 2017 2017
GBP GBP GBP GBP
--------------------- ------------- ------------- ------------- -------------
Cost
At start of year 46,577 31,819 51,520 34,144
Additions 2,966 2,966 486 486
Disposals - - (5,429) (2,811)
--------------------- ------------- ------------- ------------- -------------
At 30 September 49,543 34,785 46,577 31,819
--------------------- ------------- ------------- ------------- -------------
Depreciation
At start of year (42,216) (27,478) (41,735) (24,508)
Charge for the year (4,019) (3,999) (5,910) (5,781)
Disposals - - 5,429 2,811
At 30 September (46,235) (31,477) (42,216) (27,478)
--------------------- ------------- ------------- ------------- -------------
Net Book Value
At 30 September 3,308 3,308 4,361 4,341
--------------------- ------------- ------------- ------------- -------------
At start of year 4,361 4,341 9,785 9,636
--------------------- ------------- ------------- ------------- -------------
10. Investments
Subsidiary undertakings
Country of Type and percentage
incorporation/ of shares held at
Company registration 30 September 2018 Principal activity
---------------------- --------------- ----------------------- -------------------
Tertiary Gold Limited England & Wales 100% of ordinary shares Mineral exploration
Tertiary (Middle
East) Limited England & Wales 100% of ordinary shares Mineral exploration
Tertiary Minerals
US Inc. Nevada, USA 100% of ordinary shares Mineral exploration
The registered office of Tertiary Gold Limited and Tertiary (Middle East) Limited is the same as the Parent Company, being Sunrise House, Hulley Road, Macclesfield, Cheshire, SK10 2LP.
The registered office of Tertiary Minerals US Inc. is 241 Ridge Street, Suite 210, Reno, NV 89501, USA.
Company Company
2018 2017
Investment in subsidiary undertakings GBP GBP
--------------------------------------------- ----------- ---------
Ordinary shares - Tertiary (Middle East)
Limited 1 1
Ordinary shares - Tertiary Gold Limited 224,888 224,888
Ordinary shares - Tertiary Minerals US Inc. 1 1
Loan - Tertiary (Middle East) Limited 683,243 682,258
Less - Provision for impairment (683,243) (682,176)
Loan - Tertiary Gold Limited 5,246,129 5,251,392
Less - Provision for impairment (4,681,523) -
Loan - Tertiary Minerals US Inc. 1,689,428 1,558,865
--------------------------------------------- ----------- ---------
At 30 September 2,478,924 7,035,229
--------------------------------------------- ----------- ---------
In relation to indication of impairment of exploration assets under IFRS 6, and with reference to IAS 36.12(b), the value of the Company's investment in and due from its subsidiaries was considered. Being in excess of the market value of the Group at year end, this indicated a potential impairment under IAS 36.12(d). The directors therefore undertook an impairment review of the carrying values of the investments, with particular reference to Tertiary Gold Limited. The result of this review, together with the fact that there had been an impairment of the underlying assets held by Tertiary Gold Limited, indicated that impairment was required in the carrying value of the investment in Tertiary Gold Limited. The investment has been impaired down to the value of the underlying exploration assets, i.e. an impairment of GBP4,681,523.
Available for sale investment
Country of Type and percentage
incorporation/ of shares held at
Company registration 30 September 2018 Principal activity
------------------ --------------- ----------------------- -------------------
Sunrise Resources 5.19% of ordinary
plc England & Wales shares Mineral exploration
Aurion Resources
Limited Canada Full disposal in period Mineral exploration
Group Company Group Company
2018 2018 2017 2017
Available for sale investment GBP GBP GBP GBP
------------------------------------ --------- -------- ------- -------
Value at start of year 408,971 266,087 204,470 204,470
Additions to available for sale
investment - - 137,735 52,734
Disposal of available for sale
investment (134,633) (17,000) - -
Movement in valuation of available
for sale investment (72,010) (46,759) 66,766 8,883
------------------------------------ --------- -------- ------- -------
At 30 September 202,328 202,328 408,971 266,087
------------------------------------ --------- -------- ------- -------
Additions to available for sale investments in 2017 are a combination of shares issued in lieu of cash payment for settlement of outstanding invoices to Sunrise Resources plc for management fees, and shares acquired in Aurion Resources Limited for part settlement of consideration on disposal of Finland gold assets.
Disposals in the year ended September 2018 comprises disposal of 10,000,000 Sunrise Resources plc shares and full disposal of all Aurion Resources Limited shares.
The fair value of each available for sale investment is equal to the market value of its shares at 30 September 2018, based on the closing mid-market price of shares on its equity exchange market.
These are level one inputs for the purpose of the IFRS 13 fair value hierarchy.
11. Receivables
Group Company Group Company
2018 2018 2017 2017
GBP GBP GBP GBP
------------------- ------ ------- ------ -------
Trade receivables 59,690 59,690 61,336 61,336
Other receivables 23,229 1,913 19,753 1,463
Prepayments 13,734 11,146 13,164 10,591
------------------- ------ ------- ------ -------
At 30 September 96,653 72,749 94,253 73,390
------------------- ------ ------- ------ -------
The Group aged analysis of trade receivables is as follows:
Not 30 days Over Total
impaired or less 30 days carrying
amount
GBP GBP GBP GBP
------------------------ --------- -------- -------- ---------
2018 Trade receivables 59,690 59,690 - 61,336
2017 Trade receivables 61,336 61,336 - 61,336
------------------------ --------- -------- -------- ---------
12. Cash and cash equivalents
Group Company Group Company
2018 2018 2017 2017
GBP GBP GBP GBP
-------------------------- -------- ------- ------- -------
Cash at bank and in hand 20,944 5,379 45,141 26,791
Short-term bank deposits 197,353 197,353 114,137 114,137
-------------------------- -------- ------- ------- -------
At 30 September 218,297 202,732 159,278 140,928
-------------------------- -------- ------- ------- -------
13. Trade and other payables
Group Company Group Company
2018 2018 2017 2017
GBP GBP GBP GBP
--------------------------------- ------ ------- ------ -------
Trade payables 18,650 6,337 22,377 7,087
Other taxes and social security
costs 14,207 14,207 14,438 14,438
Accruals 30,468 16,220 32,907 13,670
Other payables 1,838 1,838 6,086 6,086
--------------------------------- ------ ------- ------ -------
At 30 September 65,163 38,602 75,808 41,281
--------------------------------- ------ ------- ------ -------
14. Issued capital and reserves
2018 2018 2017 2017
Number Nominal Number Nominal
of value of value
shares GBP shares GBP
------------------------------- ----------- -------- ----------- -----------
Allotted, called up and fully
paid Ordinary Shares
Balance at start of year 317,076,933 31,708 266,944,213 2,669,442
Split to deferred shares - - - (2,644,062)
Shares issued in the year 42,246,821 4,224 50,132,720 6,328
------------------------------- ----------- -------- ----------- -----------
Balance at 30 September 359,323,754 35,932 317,076,933 31,708
------------------------------- ----------- -------- ----------- -----------
2018 2018 2017 2017
Number Nominal Number Nominal
of value of value
shares GBP shares GBP
---------------------------- ----------- --------- ----------- ---------
Deferred Shares
Balance at start of year 267,076,933 2,644,062 - -
Split from Ordinary Shares - - 267,076,933 2,644,062
---------------------------- ----------- --------- ----------- ---------
Balance at 30 September 267,076,933 2,644,062 267,076,933 2,644,062
---------------------------- ----------- --------- ----------- ---------
Capital restructure
At a General Meeting on 13 April 2017 the shareholders approved the subdivision of the Company's ordinary share capital whereby each existing Ordinary Share with a nominal value of 1p was subdivided into 1 new Ordinary Share of 0.01p and 1 Deferred Share of 0.99p each. The Deferred Shares have no significant rights attached to them and carry no right to vote or to participate in distribution of surplus assets and are not admitted to trading on the AIM market of the London Stock Exchange plc. The Deferred Shares effectively carry no value.
Share Issues
During the year to 30 September 2018 the following share issues took place:
An issue of 41,666,670 0.01p ordinary shares at 1.2p per share, by way of placing, for a total consideration of GBP450,000 net of expenses (6 December 2017).
An issue of 362,554 0.01p ordinary shares at 1.875p per share to two directors, in satisfaction of outstanding directors' fees, for a total consideration of GBP6,798 (31 January 2018).
An issue of 217,597 0.01p ordinary shares at 0.625p per share to a director, in satisfaction of outstanding director's fees, for a total consideration of GBP1,360 (17 August 2018).
During the year to 30 September 2017 a total of 50,132,720 1.0p and 0.01p ordinary shares were issued, at an average price of 0.601p, for a total consideration of GBP271,360 net of expenses.
The total amount of transaction fees debited to the Share Premium account in the year was GBP50,000 (2017: GBP30,000).
Nature and purpose of reserves
Foreign currency reserve
Exchange differences relating to the translation of the net assets of the Group's foreign operations, which relate to subsidiaries only, from their functional currency into the Parent's functional currency, being Sterling, are recognised directly in the foreign currency reserve.
Share option reserve
The share option reserve is used to recognise the fair value of share-based payments provided to employees, including key management personnel, by means of share options and share warrants issued as part of their remuneration. Refer to Note 15 for further details.
15. Warrants granted
Warrants not exercised at 30 September 2018
Exercise Expiry
Issue date price Number Exercisable dates
------------ -------- --------- ------------------------ ----------
14/01/2014 11.25p 1,050,000 Any time before expiry 14/01/2019
14/01/2014 11.25p 300,000 Any time before expiry 14/01/2019
01/10/2014 9.00p 600,000 Any time before expiry 30/09/2019
01/10/2014 12.00p 600,000 Any time before expiry 30/09/2019
01/10/2014 15.00p 600,000 Any time before expiry 30/09/2019
01/10/2014 18.00p 600,000 Any time from 01/10/2018 30/09/2019
01/10/2014 21.00p 600,000 Any time from 01/10/2018 30/09/2019
20/02/2015 4.00p 1,200,000 Any time before expiry 20/02/2020
20/02/2015 4.00p 500,000 Any time before expiry 20/02/2020
11/03/2016 1.40p 200,000 Any time before expiry 11/03/2021
11/03/2016 1.40p 800,000 Any time before expiry 11/03/2021
31/01/2017 1.025p 200,000 Any time before expiry 31/01/2022
31/01/2017 1.025p 800,000 Any time before expiry 31/01/2022
31/01/2018 1.875p 200,000 Any time from 01/02/2019 31/01/2023
31/01/2018 1.875p 800,000 Any time from 01/02/2019 31/01/2023
------------ -------- --------- ------------------------ ----------
Warrants are issued for nil consideration and are exercisable as disclosed above. They are exchangeable on a one for one basis for each ordinary share at the exercise price on the date of conversion.
Share-based payments
The Company issues warrants to directors and employees on varying terms and conditions.
Details of the share warrants outstanding during the year are
as follows:
2018 2017
Weighted Number Weighted
average of average
Number exercise share warrants exercise
of price and share price
share warrants Pence options Pence
------------------------------ --------------- --------- --------------- ---------
Outstanding at start of year 10,050,000 8.425 11,550,000 9.353
Granted during the year 1,000,000 1.875 1,000,000 1.025
Exercised during the year - - - -
Forfeited during the year - - - -
Expired during the year (2,000,000) 7.630 (2,500,000) 9.750
------------------------------ --------------- --------- --------------- ---------
Outstanding at 30 September 9,050,000 7.877 10,050,000 8.425
------------------------------ --------------- --------- --------------- ---------
Exercisable at 30 September 6,850,000 6.717 7,250,000 7.427
------------------------------ --------------- --------- --------------- ---------
The warrants outstanding at 30 September 2018 had a weighted average exercise price of 7.9p (2017: 8.4p), a weighted average fair value of 1.84p (2017: 2.24p) and a weighted average remaining contractual life of 1.76 years.
In the year ended 30 September 2018, warrants were granted on 31 January 2018. The aggregate of the estimated fair values of the warrants granted on this date is GBP7,082. In the year ended 30 September 2017, warrants were granted on 31 January 2017. The aggregate of the estimated fair values of the warrants granted on this date is GBP3,404.
There were no warrants exercised in the year ending 30 September 2018.
The inputs into the Black-Scholes-Merton Pricing Model were as follows:
2018 2017
--------------------------------- ------- -------
Weighted average share price 1.875p 1.025p
Weighted average exercise price 1.875p 1.025p
Expected volatility 70.0% 62.5%
Expected life 4 years 4 years
Risk-free rate 1.06% 0.59%
Expected dividend yield 0% 0%
--------------------------------- ------- -------
Expected volatility was determined by calculating the historical volatility of the Company's share price over the previous three years. The expected life used in the model has been adjusted based on management's best estimate for the effects of non-transferability, exercise restrictions and behavioural considerations.
The Company recognised total expenses of GBP8,997 and GBP11,396 related to equity-settled share based payment transactions in 2018 and 2017 respectively.
16. Operating lease commitments
The Company rents office premises under an operating lease agreement. The lease term is for one year expiring on 30 November each year. No contingent rent is payable. The lease is eligible for renewal on expiry.
Future minimum lease payments under non-cancellable operating leases are:
2018 2017
Land & buildings Land & buildings
GBP GBP
----------------------- ----------------- -----------------
Office accommodation:
Within one year 3,456 3,388
----------------------- ----------------- -----------------
The Company does not sub-let any of its leased premises.
Lease payments recognised in loss for the period amounted to GBP20,668 (2017: GBP20,239).
17. Related party transactions
Key management personnel
The Directors holding office in the period and their warrants held in the share capital of the Company are:
At 30 September 2018 At 30 September 2017
Share Warrants Warrant Share
Shares warrants exercise expiry Shares warrants
number number price date number number
------------------------ ---------- --------- --------- ---------- ----------- ---------
P L Cheetham* 12,612,113 500,000 11.250p 14/01/2019 12,612,113 2,000,000
1,000,000 4.000p 20/02/2020
D A R McAlister 876,765 - - - 586,614 -
D Whitehead (deceased) - - - - 414,900 -
R H Clemmey 977,405 350,000 11.250p 14/01/2019 687,405 4,350,000
600,000 9.000p 30/09/2019
600,000 12.000p 30/09/2019
600,000 15.000p 30/09/2019
600,000 18.000p 30/09/2019
600,000 21.000p 30/09/2019
------------------------ ---------- --------- --------- ---------- ----------- ---------
* Includes 2,843,625 shares held by K E Cheetham, wife of P L Cheetham.
The Directors have no beneficial interests in the shares of the Company's subsidiary undertakings as at 30 September 2018. The Directors of the Company are the Directors of all Group companies.
Details of the Parent Company's investment in subsidiary undertakings are shown in Note 10.
Sunrise Resources plc
During the year the Company charged costs of GBP218,841 (2017: GBP204,110) to Sunrise Resources plc being shared overheads of GBP24,607 (2017: GBP24,874), costs paid on behalf of Sunrise Resources plc of GBP5,421 (2017: GBP4,646), staff salary costs of GBP77,597 (2017: GBP69,957) and directors' salary costs of GBP111,216 (2017: GBP104,633), comprising P L Cheetham GBP110,790 (2017: GBP104,324) and R H Clemmey GBP426 (2017: GBP309). All salary costs include employer's National Insurance and statutory pension contributions.
The salary costs in Notes 4 and 5 include these charges.
At the balance sheet date an amount of GBP59,690 (2017: GBP61,275) was due from Sunrise Resources plc.
P L Cheetham, a director of Tertiary Minerals plc, is also a director of Sunrise Resources plc.
Shares and warrants held in Sunrise Resources plc by the Tertiary Minerals plc Directors are as follows:
At 30 September 2018 At 30 September 2017
Warrants Warrants
Shares Exercise expiry Shares Warrants
number Number price date number number
------------------------ ---------- --------- --------- ---------- ----------- ---------
P L Cheetham* 83,454,885 2,000,000 0.550p 14/01/2019 79,741,326 7,000,000
3,000,000 0.275p 05/02/2020
D A R McAlister 550,000 - - - 550,000 -
D Whitehead (deceased) - - - - 250,000 -
R H Clemmey - 500,000 0.550p 14/01/2019 - 2,750,000
750,000 0.275p 05/02/2020
500,000 0.160p 18/02/2021
500,000 0.135p 01/02/2022
500,000 0.160p 31/01/2023
------------------------ ---------- --------- --------- ---------- ----------- ---------
* Includes 5,500,000 shares held by K E Cheetham, wife of P L Cheetham.
18. Capital management
The Group's capital requirements are dictated by its project and overhead funding requirements from time to time. Capital requirements are reviewed by the Board on a regular basis.
The Group manages its capital to ensure that entities within the Group will be able to continue as going concerns, to increase the value of the assets of the business and to provide an adequate return to shareholders in the future when exploration assets are taken into production.
The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of its assets. In order to maintain or adjust the capital structure the possibilities open to the Group in future include issuing new shares, consolidating shares, returning capital to shareholders, taking on debt, selling assets and adjusting the amount of dividends paid to the shareholders.
19. Financial instruments
At 30 September 2018, the Group's and Company's financial assets consisted of available for sale investments, trade receivables and cash and cash equivalents. At the same date, the Group and Company had no financial liabilities other than trade and other payables due within one year and had no agreed borrowing facilities as at this date. There is no material difference between the carrying and fair values of the Group and Company's financial assets and liabilities.
The carrying amounts for each category of financial instruments held at 30 September 2018, as defined in IAS 39, are as follows:
Group Company Group Company
2018 2018 2017 2017
GBP GBP GBP GBP
------------------------------------ ------- ------- ------- -------
Loans & receivables 301,215 264,335 240,367 203,727
Available for sale investments 202,328 202,328 408,971 266,087
Financial liabilities at amortised
cost 50,276 23,715 60,689 26,163
------------------------------------ ------- ------- ------- -------
Risk management
The principal risks faced by the Group and Company resulting from financial instruments are liquidity risk, foreign currency risk and, to a lesser extent, interest rate risk and credit risk. The Directors review and agree policies for managing each of these risks as summarised below. The policies have remained unchanged from previous periods as these risks remain unchanged.
Liquidity risk
The Group holds cash balances in Sterling, US Dollars, Swedish Kronor, Euros, Canadian Dollars and Saudi Riyals to provide funding for exploration and evaluation activity. The Group and Company are dependent on equity fundraising through private placings which the Directors regard as the most cost-effective method of fundraising. The Directors monitor cash flow in the context of their expectations for the business to ensure sufficient liquidity is available to meet foreseeable needs.
Currency risk
The Group's financial risk management objective is broadly to seek to make neither profit nor loss from exposure to currency risk. The Group is exposed to transactional foreign exchange risk and takes profits and losses as they arise as, in the opinion of the Directors, the cost of hedging against fluctuations would be greater than the related benefit from doing so.
Bank and cash balances were held in the following denominations:
Group Company
2018 2017 2018 2017
GBP GBP GBP GBP
------------------------- ------- ------- ------- -------
United Kingdom Sterling 203,098 132,779 202,085 129,533
United States Dollar 4,171 16,113 313 11,122
Swedish Krona 483 94 5 5
European Euro 10,486 10,234 314 253
Canadian Dollar 15 15 15 15
Saudi Riyal 44 43 - -
218,297 159,278 202,732 140,928
------------------------- ------- ------- ------- -------
Surplus Sterling funds are placed with NatWest bank on short-term treasury deposits at variable rates of interest.
The Company and the Group are exposed to changes in exchange rates mainly in the Sterling value of US Dollar denominated financial assets.
Sensitivity analysis shows that the Sterling value of its US Dollar denominated financial assets at
30 September 2018 would increase or decrease by GBP209 for each 5% increase or decrease in the value of Sterling against the Dollar.
Neither the Company nor the Group is exposed to material transactional currency risk.
Interest rate risk
The Group and Company finance their operations through equity fundraising and therefore do not carry borrowings.
Fluctuating interest rates have the potential to affect the loss and equity of the Group and the Company insofar as they affect the interest received on financial instruments held for the benefit of the Group. The Directors do not consider the effects to be material to the reported loss or equity of the Group or the Company presented in the financial statements.
Credit risk
The Company has exposure to credit risk through receivables such as invoices issued to related parties and its joint arrangements for management charges. The amounts outstanding from time to time are not material and are considered by the Directors to be low risk.
The Company has exposure to credit risk in respect of its cash deposits with NatWest bank and this exposure is considered by the Directors to be low.
20. Contingent liability
Following an audit of the Tertiary Gold Sweden Branch by the Swedish tax office, Skatteverket, an assessment of SEK 288,256 (approximately GBP24,942) was levied in February 2017 in respect of the tax year 2013/14. The Skatteverket assertion of an incorrect tax return submission has been strongly contested by the Company's Swedish tax lawyer and the case is currently in appeal with an expectation based on professional advice that the appeal is likely to succeed.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
FR BGBDDDGBBGID
(END) Dow Jones Newswires
December 12, 2018 05:15 ET (10:15 GMT)
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